The city of Detroit has filed for bankruptcy Thursday, becoming the largest municipal bankruptcy in U.S. history. The main problem that led to the city’s irreversible debt is steep population and tax-base falls.

The bankruptcy was filed by bankruptcy expert Kevin Orr, who was hired by Michigan Governor Rick Snyder earlier in the year when he realized that the city was in a financial emergency without any set plan of improving things.

Orr came up with a plan to completely restructure the city’s debt, but was unsuccessful in convincing some of the city’s creditors to only take pennies on the dollar. This was the only idea left at saving the city from its fiscal problems, and it failed.

City officials, who are being closely monitored by the President, are trying to be optimistic about the situation. Some believe that bankruptcy is their first step towards restoration and recovery of Detroit.

“I know firsthand, because I live in Detroit, that our city is on the rebound in some key ways, and I know deep in my heart that the people of Detroit will face this latest challenge with the same determination that we have always shown,” said Senator Carl Levin, according to Fox.

Detroit was not always in such horrible financial condition. During World War II, the city thrived with the constant manufacturing of planes and tanks, earning the nickname “Arsenal of Democracy”.

CNN reports that a large cause of the debt is that between 2000-2010 Detroit lost a quarter million residents, their population falling 28 percent in one decade. Many middle-class citizens also left along with their tax dollars. Their unemployment rate is at 16.3 percent, twice the average of the state of Michigan.

Detroit’s long-term debt now stands between $17-20 billion.

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