The ailing auto industry in Detroit as well as its declining population has prompted that city to file for bankruptcy, making it the largest U.S. city to do so.

Detroit’s population has dwindled to 700,000 from 1.8 million people just fifty years ago. Years ago, the auto industry drew people to the city to participate in the building of automobiles. But as the auto industry has dried up in Detroit, victim of the foreign auto industry, the population finds itself moving away, leaving boarded up houses and deserted neighborhoods.

It is widely felt that the city’s fiscal problems are directly tied to the bankrupcy reorganizations of General Motors and Chrysler, who called Detroit home.

The former auto city filed for Chapter 9 protection on Thursday. The bankrupcy may help the city as it faces a budget deficit of $300 million, and long-term debt of well over $18 billion. It will take 30 to 90 days to determine if the city is eligible for protection from its creditors.

It was determined earlier this year by bankrupcy expert Kevyn Orr that the city was on an unsustainable path. He was hired by Michigan Governor Ricky Snyder to work on the city in fiscal crisis.

Now that the Motor City is under state supervision, the future of the pension plans and health care for the city’s 10,000 public employees is in doubt. The city will continue to maintain police and fire protection but many of the other services are in danger of being shut down like the street lights that already have been. The two pension funds for public employees filed suit in state court to try and prevent the slashing of retiree benefits.

Governor Snyder tried to calm the state of Michigan in light of the Moter City’s bankrupcy filing saying that “We’re the comeback state in Michigan, but to be a great state we need Detroit on the path to being a great city again.” He said that the bankrupcy filing is necessary to stabilize the city again.

The news from Michigan caused the $3.7 Trillion Municipal Bond Market to go into a tumble.