Such bankruptcies are rare - only slightly more than 60 cities, towns, villages and counties have filed under Chapter 9, the court proceeding used by municipalities, since the mid-1950s.

Not everyone agrees on how much Detroit owes, but Kevyn Orr, the emergency manager who was appointed by Michigan Governor Rick Snyder to resolve the city's financial problems, has said the debt is likely to be $US18 billion ($19.6 billion) and perhaps as much as $US20 billion.

That dwarfs the case of Jefferson County, Alabama, which filed in 2011 with about $US4 billion in debt. The population of Detroit is more than twice that of Stockton, California, which filed for bankruptcy last year and had been the nation's most populous city to do so.

Other major cities, including New York and Cleveland in the 1970s and Philadelphia two decades later, have teetered near the edge of financial ruin but ultimately found solutions. Detroit's struggle, experts say, is particularly dire because it is not limited to a single event or one failed deal, like the troubled sewer system largely responsible for Jefferson County's downfall.

Instead, many factors have brought Detroit to this point, including a shrinking tax base that still had a 360-square-kilometre city to maintain; overwhelming health-care and pension costs; and city services crippled by aged computer systems, poor record-keeping and widespread dysfunction.

''It's not enough to say, let's reduce debt,'' said James Spiotto, an expert in municipal bankruptcy at the law firm of Chapman and Cutler in Chicago. ''At the end of the day, you need a real recovery plan. Otherwise you're just going to repeat the whole thing over again.''

Founded more than 300 years ago, the city expanded at a stunning rate in the first half of the 20th century with the arrival of the car industry, and then shrank in recent decades at a similarly remarkable pace. A city of 1.8 million in 1950, it is now home to 700,000 people, as well as to tens of thousands of abandoned buildings and vacant blocks.

People have to wait an average of 58 minutes for the police to respond to their calls, compared with an average of 11 minutes nationwide.

Last year, Detroit had the highest rate of violent crime in the nation for a city larger than 200,000, a report from Mr Orr's office showed. About 40 per cent of the city's street lights do not work. More than half of Detroit's parks have closed since 2008.

From here, there is no road map for Detroit's recovery. Some bankruptcy experts and city leaders bemoaned the likely fallout from the filing. They anticipate further benefit cuts for city workers and retirees and more reductions in services.

But others, including some Detroit business leaders, said bankruptcy seemed the only choice left - and one that might finally lead to a much needed overhaul of city services and a plan to pay off some reduced version of the overwhelming debts. In short, a new start.

The decision to go to court signalled a breakdown after weeks of tense negotiations, in which Mr Orr had been trying to persuade creditors to accept pennies on the dollar and unions to accept cuts in benefits.

All along, the state's involvement - including Mr Snyder's decision to send in an emergency manager - has carried racial implications, setting off a wave of concerns that the mostly white, Republican-led state government was trying to seize control of Detroit, a Democratic-held city where more than 80 per cent of residents are black.

Officials in other financially troubled cities may feel encouraged to follow Detroit's path, some experts say. But those leaders will want to see how this case turns out first, particularly when it comes to pension and retiree healthcare costs, said Karol Denniston, a bankruptcy lawyer.

For some Detroiters, recent memories of bankruptcies by Chrysler and General Motors - and the re-emergence of those companies - appeared to have calmed nerves about such a move. But experts say corporate bankruptcy procedures are different from municipal bankruptcies.

In municipal bankruptcies, for instance, the ability of judges to intervene in how a city is run is sharply limited.

''If you end up with precedent that allows the restructuring of retirement benefits in bankruptcy court, that will make it an attractive option for cities,'' Ms Denniston said. ''Detroit is going to be a huge test kitchen.''

New York Times, AFP