Detroit Mayor, Dave Bing
Detroit has become the largest US city ever to file for bankruptcy, with debts of at least $15bn (£10bn).
The city, once a symbol of US industrial power, is seeking protection from creditors who include public-sector workers and their pension funds, reports the BBC.
Unions described the bankruptcy filing as a power grab.
Detroit has faced decades of problems linked to declining industry. Public services are nearing collapse and about 70,000 properties lie abandoned.
Mayor Dave Bing has vowed that public services will keep running and wages for public workers will be paid.
On Thursday, Michigan state-appointed emergency manager Kevyn Orr asked a federal judge to place the city into bankruptcy protection.
If it is approved, he would be allowed to liquidate city assets to satisfy creditors and pensions.
Detroit - known as Motor City for its once-thriving automobile industry - stopped unsecured-debt payments last month to keep the city running as Orr negotiated with creditors.
He proposed a deal last month in which creditors would accept 10 cents for every dollar they were owed.
But two pension funds representing retired city workers resisted the plan. Thursday's bankruptcy filing comes days ahead of a hearing that would have tried to stop the city from making such a move.
Orr suggested at the time there was a 50-50 chance of the city needing to file for bankruptcy. He also said the city's long-term debt could be between $17bn and $20bn.
At a press briefing on Thursday, Orr said filing for bankruptcy was the "first step toward restoring the city".
Alongside him, Detroit Mayor Dave Bing said that residents had to make a new start.
"I really didn't want to go in this direction - but now that we are here, we have to make the best of it," Bing said.