The Mayor of Detroit said the decision to file for bankruptcy protection was "very difficult", adding, "If it's going to make the citizens better off then this is a new start for us".
Mayor Dave Bing told a news conference: "This is a very, very difficult day for me, as I'm sure it is for a lot of our citizens here in the city of Detroit.
"When I took office over four years ago, I said Detroit was in a financial crisis and we tried to work our way through this situation over the last four years but it has been very, very difficult.
"As tough as this is, I really didn't want to go in this direction, but now that we are here, we have to make the best of it".
Once a powerhouse of the US car industry, Detroit has filed for bankruptcy as it owes creditors almost $20bn it cannot pay.
Detroit, once a booming American metropolis, has become the largest US city to file for bankruptcy, with debts of at least $18bn.