The troubled US city of Detroit has defaulted on its debt payments as it threatened to become the country's largest ever municipal bankruptcy.

Detroit imposed a moratorium, or suspension, on some debt payments effective Friday to preserve the cash needed for essential services.

The Michigan state city's state-appointed emergency manager submitted a restructuring plan to holders of some $18.5bn in IOUs.

"Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past 45 years have brought Detroit to the brink of financial and operational ruin," said Kevyn Orr, the bankruptcy expert appointed by Michigan's governor to straighten out the city's troubled finances.

If creditors do not accept the plan, Detroit could be forced into what would be by far the largest ever bankruptcy by a US city.

Orr told reporters there is a "50-50" chance that Detroit will declare bankruptcy and that a decision should happen in the next 30 days.

The restructuring proposal addresses how it will meet its obligations on about $7bn in secured debt and $11.5bn in unsecured borrowings.

City suffering

In his report, Orr described city conditions that would worsen if a deal on the debt cannot be reached.

It said that due to police cutbacks Detroit's crime rate became the worst among large US cities in 2012, five times the national average.

About 40 percent of street lights do not function, and the police department is "dysfunctional" - strained by cutbacks and having gone through five different chiefs in five years.

The report said the city has 78,000 abandoned and blighted buildings, "nearly half of which are considered dangerous."

Fewer than half of Detroit's ambulances were functioning at any time during the first quarter of this year, fire department vehicles are in bad shape and the city's income tax systems are in "catastrophic" state.

Once the fourth largest city in the US, Detroit has seen its population shrink by more than half, from 1.8 million people in 1950 to 685,000 today, as crime, flight to the suburbs and the hollowing out of the car industry ate away at its foundations.

Source: Agencies