Judge clears way for Detroit bankruptcy

The city of Detroit entered into the largest city bankruptcy in U.S. history Tuesday, after a judge determined it could legally do so.

Detroit first filed for Chapter 9 bankruptcy in July, looking to get out from under roughly $18.5 billion in debt and other obligations. Michigan Gov. Rick Snyder (R) Kevyn Moore, the city’s emergency manager, backed the plan.

{mosads}Bankruptcy Judge Steven Rhoades backed the city’s bankruptcy plan, calling it insolvent, according to The Detroit News. He said it would have been impracticable for the city to try and negotiate with its thousands of creditors before declaring bankruptcy, and trying to free up funds by selling off assets would not have addressed its long-term financial problems.

With the bankruptcy plan now receiving the green light, the city is expected to unveil a plan to cut retiree pensions and potentially sell pieces from the Detroit Institute of Arts, according to the News.

When Detroit first announced its intentions in July, White House spokesperson Amy Brundage said the president was closely monitoring the situation.

“While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities,” she said.

Sens. Carl Levin (D-Mich.) and Debbie Stabenow (D-Mich.) both said at the time they were saddened by the news, but confident the city could emerge from the process intact.