Why Detroit is Struggling to Recover From Its Bankruptcy

Months after completing its Chapter 11 bankruptcy timeline — the largest municipal bankruptcy in American history — the city of Detroit is still struggling to get back on its feet.

According to a March 2 Daily Astorian article, a growing number of Detroit’s residents who have limited education and skills are struggling to find work in their hometown, where the local job market has mostly run dry. As the city’s population has dwindled throughout recent years, service jobs and blue-collar sectors have shrunk profoundly.

Combined that with the fact that 40% of Detroit’s residents don’t own a car, and you have thousands of people forced to take jobs that are hours-long commutes away from the city via public transportation.

To help spur Detroit’s post-bankruptcy recovery, Mayor Mike Duggan has made a priority of establishing training programs that would help residents gain more skills and become more attractive to employers. Yet these initiatives don’t do anything to help encourage job creation itself.

As a result, more than 228,000 Detroit residents now commute outside city limits to their jobs — leaving just 115,000 who both live and work within the city, the Daily Astorian reports. With public transportation options in short supply, many are considering the advantages of moving outside the city, as well. In 2014, Detroit’s unemployment rate hung at a staggering 14.9%, a rate much higher than the regional average of less than 7%.

Unlike other common bankruptcy options like the Chapter 7 bankruptcy or Chapter 13 bankruptcy timeline, which help individual consumers discharge or repay their debts, a Chapter 11 bankruptcy timeline is intended for multi-person enterprises or organizations. In 2013, 8,980 organizations sought out bankruptcy help with a Chapter 11 bankruptcy attorney.

In Detroit’s bankruptcy filing, the city restructured an estimated $18–20 billion. The city’s plan for debt readjustment was finally confirmed on November 7, 2014. Currently, the city is looking to recover from its bankruptcy by avoiding extraneous debts and consistently making payments on its existing debts — much like an individual who filed bankruptcy would do to recover his or her credit score.

What are your thoughts on Detroit’s sluggish post-bankruptcy recovery? Have any other questions about filing bankruptcy? Let us know in the comments below.