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US Municipal Government Files Country's Biggest Bankruptcy

A manhole cover bears the logo/design of Jefferson County, Alabama. Alabama's Jefferson County submitted a second offer to creditors in an attempt to settle its $3.14 billion sewer bond debt, and to avoid what would be the largest municipal bankruptcy in

A local government in the U.S. has filed the country's biggest municipal bankruptcy, unable to pay back a $3 billion debt to build a sewer system.

The Jefferson County government in, the southern U.S. state of Alabama attempted for three years to negotiate a repayment plan for the debt, with its creditors agreeing to cut the amount of money the municipality owed. But the local government said Wednesday it could no longer wait for complex details to be worked out and made the bankruptcy claim.

Local government bankruptcies are unusual - but not unprecedented - in the U.S. There have been a handful of high-profile municipal bankruptcy claims in recent months as the sluggish U.S. economy has diminished tax revenues for local governments, making it difficult for them to repay their debts. The Alabama case could eventually be resolved under court supervision, with the local government repaying a reduced amount to the banks that made the loans.

The U.S. government announced more favorable economic news Thursday. It said the country's trade deficit unexpectedly narrowed in September to about $43 billion, the lowest figure this year.

The government also said that 390,000 unemployed workers made first-time claims for financial assistance last week, 10,000 less than the week before. The four-week average for unemployment compensation claims dropped to 400,000, the lowest figure since April and an indication employers are laying off fewer workers although not necessarily hiring more.

Some information for this report was provided by AP.