A federal judge in the United States has ruled Detroit should be granted bankruptcy protection from its creditors.
Detroit is now expected to submit a plan to rid its balance sheet of $18bn (£11bn) of liabilities.
The city filed for bankruptcy protection more than four months ago. The BBC reports a coalition or retired city employees, police and fire-fighter unions, and others sued in July to block the filing.
However, judge Steven Rhodes said Detroit's bankruptcy was a "foregone conclusion", adding the city should have probably filed years ago.
Emergency manager Kevyn Orr is expected to present a plan by the end of this year for how the city will deal with its more than 100,000 creditors.
City officials say they hope Detroit can emerge from bankruptcy by the end of 2014.