DETROIT, December 3 (RAPSI) - The US city of Detroit, Michigan was deemed eligible Tuesday by a US federal court for Chapter 9 bankruptcy protection, local media outlet Detroit Free Press reported. 

According to the report, Detroit was deemed to have satisfied the requisite legal elements, thus making it the largest municipality in US history to attain Chapter 9 bankruptcy protection. 

Detroit filed for Chapter 9 bankruptcy on July 18.

An information sheet published on the court’s website describes the purpose of Chapter 9 bankruptcy as enabling insolvent municipalities to gain protection from creditors while reorganizing debts through a “plan of debt adjustment.”

According to Detroit Free Press, lawyers representing the city are expected to file a plan of adjustment before the end of the year. 

A municipality must meet certain requirements in order to qualify for Chapter 9 eligibility, according to the information sheet, including the requirement that: “it must be specifically authorized by its state to file bankruptcy.” The document goes on to explain: “Objections to the petition may be filed, and the court may dismiss the petition if the court finds that it was not filed in good faith or does not meet statutory requirements.”

The judge stated that the city had not satisfied the good faith requirement in terms of negotiating with creditors, but noted that in this case – good faith was impracticable, according to Detroit Free Press.

USA Today reported earlier that Detroit is failing to meet its residents’ most basic needs at this point. According to the report, the city’s revenue toppled 40% between 1962 and 2002, and that unemployment in the city has tripled between 2000 and 2012. 

The BBC reported that the city’s expenditures had remained an average of $100 million higher than its revenues each year between 2008 and 2012. The same report noted that the presiding judge referenced the testimony of Detroit’s police chief, who referred to the conditions in his precinct as “deplorable” and said that he had been required to bring his own bullet-proof vest when transferring to Detroit’s police force due to the city’s lack thereof. 

A memorandum submitted by law firm Jones Day in July states: “The City’s enormous debts and other legacy liabilities present a substantial barrier to addressing [its] problems. The City owes various constituencies more than $18 billion: approximately (a) $5.85 billion in special revenue obligations; (b) $6.4 billion in other post-employment benefit… liabilities; (c) $3.5 billion in underfunded pension liabilities based on current actuarial estimates; (d) $1.13 billion in secured and unsecured general obligation… liabilities; (e) $1.43 billion in liabilities under pension-related certificates of participation ("COPs"); (f) $296.5 million in swap liabilities related to the COPs; and (g) $300 million in other liabilities. Debt service on the obligations other than those secured by special revenues consumed a staggering 42.5% of the City's revenues in the 2013 fiscal year. That percentage is projected to increase to almost 65% of revenues by 2017.”