[Frieza_Prexus]

A city exists as a legal entity known as a municipality. Much like a corporation exists legally. It's really no different. Municipalities file for bankruptcy under chapter 9 of the bankruptcy code within the United States Code Title 11. Much in the way that you as a person could file for bankruptcy under chapter 7. The different chapters are merely different types depending on who you are, how much you owe, and whether or not you're looking to be absolved of your debt completely or if you are willing to commit to a repayment plan.

Detroit is filing for bankruptcy because it is insolvent meaning that it cannot pay its debts as they come due. There is some debate as to why this is the case, but most commentators generally believe that Detroit is really shitty with money. Specifically, Detroit has a lot of unions that it has entitled to numerous benefits that the city must pay according to law. This includes a lot of pensions for government employees that have since retired.

Detroit financed most of the obligations by using tax revenues which were historically very high when the city was the base of the American auto industry. Since the private manufacturing has dried up for a number of reasons, Detroit has experienced massive budget shortfalls and cannot pay the obligations it incurred over the last 5 or so decades.

Also, their mayors are almost always incompetent criminals some of which are in jail right now for corruption.