The once-prosperous industrial city of Detroit is now eligible for bankruptcy protection, and might pay only part of pensions and other financial obligations.
A bankruptcy judge approved this key step Tuesday in the largest municipal bankruptcy in U.S. history. Unions facing pension cuts and other creditors are likely to appeal the decision.
Detroit is home to the U.S. auto industry and the city once had a population of 1.8 million. As U.S. automakers had difficulty selling their products the "Motor City" lost more than one million residents, which hurt property values and the tax base.
Mismanagement and borrowing compounded the financial problems and city services such as police, garbage pickup, and street lighting deteriorated.
Officials have until March to craft a plan to pay just a portion of Detroit's $18 billion long term debt. Creditors including unions, bondholders, and retiree groups are in mediation talks under judicial supervision, haggling over who will get paid and how much.
Some information for this report was provided by AP.