Detroit – The Largest Municipal Bankruptcy Filing in U.S. History – What happened?

On July 18, 2013, the City of Detroit filed for Chapter 9 Bankruptcy making it the largest municipal bankruptcy filing in U.S. history as measured by the amount of outstanding debt.  Detroit is estimated to owe $18-$20 billion in debt over 10,000+ creditors, 100 discrete bond issuances and 50 labor bargaining units. Prior to the Detroit filing, Jefferson County, Alabama’s $4 billion filing in 2011 had been the largest municipal bankruptcy filing in the United States.

So where did things go so horribly wrong?  The above video is the first in a three part series on the Detroit bankruptcy filing. Video #1 concentrates on The Economics of Failure. The video begins with an illustration of demographic trends for the following three major U.S. cities:

  • Dallas – People are solidly moving into Dallas due to limited taxes; limited benefits and reduced regulation;
  • Los Angeles – While the climate of Los Angeles still attracts people to the state, high state income tax and the most restrictive environment regulations in the country are driving many people out of the state of California;
  • Detroit – There is a massive population exodus from Detroit with virtually no immigration due to the city drowning in debt from more than 50 years of democratic mayors running the city. The video cites cronyism, incompetence and crime as some of the major contributors.

During the 1950’s as the American automotive industry began to establish its dominance, the population of Detroit reached an all-time high of 1,849,568.  Today, the city has fewer than 700,000 residents to cope with the debts built up by the “Bigs”:

  • Big Business
  • Big Government
  • Big Unions
  • Big Payoffs

More than 50% of Detroit’s debt that resulted in the City’s bankruptcy filing comes from promises made to workers for pension and other post retirement benefits:

  • $3.5 Billion in unfunded pension liabilities
  • $5.7 Billion in Post Retirement medical benefits

The video attributes the Detroit meltdown to “public sector unions and their greed. People in Detroit would rather retire with six figure retirement salaries than have a police force or a fire department”.

Detroit was once an industrial powerhouse that some historians argue was responsible for winning World War II. At one time, the city boasted more millionaires than anywhere else in the country.  The video makes the argument that Detroit has collapsed economically because it was too big to fail and attributes blame for the failure from poor business decisions and failure to adapt to market conditions by the Big Three Auto Manufacturers to the interference by the government in the natural rise and fall of companies. 

Stay tuned for Video #2 which looks at the Political Forces which brought Detroit to its knees in financial collapse and Video #3 which which looks at possible solutions for saving the City.


Our motto is "When Lawyers Compete You Win!" If you are a consumer in need of legal services, you can post your case anonymously and Free of Charge. If you are an attorney seeking new clients, you may register on the site for free. You will only pay when a client requests that you contact them to discuss their case.

Leave a Reply

Your email address will not be published. Required fields are marked *


9 − = six

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>