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.
Detroit has faced decades of problems linked to the decline of its industry.
The BBC’s Jonny Dymond in Washington says public services are in a state of near collapse and around 70,000 properties lie abandoned.
However, 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 Mr 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.
Mr 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.
BBC