While economists were shocked to see Detroit file for bankruptcy, many are now scared that it has set off a chain reaction throughout the nation. At $18 billion, and probably more, Detroit is the largest municipal bankruptcy case in the history of America. While it was not the first city in the U.S. to file for bankruptcy, it is by far the largest. And chances are it won’t be the last.
The financial issue currently plaguing the nation is unfunded liabilities such as pension commitments. This was at the heart of why Detroit filed for bankruptcy. According to Kevin Orr, Detroit’s emergency manager, the city was about $3.5 billion short of what it needed to pay its current and future retirees.