The Detroit Municipal Bankruptcy

Detroit Municipal Bankruptcy  pic
Detroit Municipal Bankruptcy
Image: news.yahoo.com

Stephen Lisauskas has spent his career helping municipalities avoid bankruptcy and reorganizing local government to increase efficiency. In his work helping to turn around the finances of municipalities such as Springfield Massachusetts, Stephen Lisauskas has managed to help communities avoid bankruptcy. However, there are municipalities across the United States that have not managed to avoid declaring bankruptcy; Detroit filed for bankruptcy in 2013.

The right of a municipal government to file bankruptcy only applies to those municipal governments authorized by their state to file for bankruptcy. This authorization may come from a specific state laws, or by an officer of the government specifically empowered to determine whether a municipality may declare bankruptcy. Since 1937 there have been 665 municipal bankruptcies, of these 51 have occurred since 2010. This marked increase in the rate of municipal bankruptcies may be attributed to the increase in unfunded liabilities, especially pension liabilities, and the economic recession. Detroit is by far the largest municipal bankruptcy in US history with an estimated debt of $18-20 billion.

Detroit filed for bankruptcy on July 18th, 2013 after it became clear that the city was insolvent, with nearly a third of its outgoing payments to pensions. While the city was initially ruled ineligible to declare bankruptcy by a Michigan court, this decision was reversed in October. The Detroit bankruptcy is expected to result in a $7 billion loss to its creditors.

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