Detroit's municipal bankruptcy

Detroit's population fell from a peak of about 1.8 million in the 1950s to under 700,000 by 2013, as the decline of the domestic auto industry and decades of suburban flight steadily eroded the city's tax base while its costs — including pension and retiree healthcare obligations built up during more prosperous decades — stayed largely fixed. By mid-2013, the city was carrying an estimated $18 to $20 billion in long-term debt and could no longer cover basic services, prompting Michigan's governor to appoint an emergency manager with authority to file for bankruptcy protection on the city's behalf. Detroit filed for Chapter 9 bankruptcy on July 18, 2013, the largest municipal bankruptcy filing in US history by debt load. The case forced difficult tradeoffs between pension obligations to retired city workers and creditors' claims, ultimately resolved through a 'grand bargain' in which the state, private foundations and other backers contributed funds to protect pensions while the city shed a portion of its overall debt and exited bankruptcy in December 2014.