November 17, 2010 / 12:29 AM / in 7 years

Hamtramck seeks Michigan OK to file for bankruptcy

CHICAGO, Nov 16 (Reuters Legal) - The Detroit-area city of Hamtramck is asking the state of Michigan for permission to file for municipal bankruptcy under Chapter 9, the Detroit News reported on Tuesday.

City Manager Bill Cooper told the newspaper that Hamtramck, a city of about 20,000, has a $3 million deficit in its $18 million annual budget and that it would run out of money on January 31, 2011.

Municipal bankruptcy, a rarely used tool by cities and other units of local government, would allow the city to deal with creditors and extract concession from its unions, the newspaper reported.

Hamtramck officials and the governor’s office and the Michigan Treasury could not be reached for comment by Reuters.

An emergency financial manager appointed by the state can take a city into bankruptcy under Michigan law, but Hamtramck shed its last vestiges of state control in 2006.

Hamtramck’s letter requesting bankruptcy is under review by state treasury officials, the Detroit News report said.

Last week, another U.S. city - Harrisburg, Pennsylvania -- announced that it had retained Cravath, Swaine & Moore on a pro-bono basis to advise it on a possible municipal bankruptcy filing.

Reporting by Karen Pierog of Reuters; Additional reporting by James Kelleher of Reuters and Terry Baynes of Reuters Legal

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