A judge in Michigan has ordered the withdrawal of a federal bankruptcy petition filed for the city of Detroit on Thursday.
Judge Rosemarie Aquilina said the petition violated state law and the state constitution.
Earlier, Governor Rick Snyder said the move towards bankruptcy would reverse decades of decay.
Detroit, the birthplace of the US car industry, has debts totally $US18 billion. Public services are nearing collapse and about 70,000 properties lie abandoned.
Bankruptcy would allow emergency manager Kevin Orr to liquidate the city's assets to satisfy creditors and pensioners.
The BBC reports about $US9 billion is owed to pension funds and retiree healthcare benefits.
Mr Orr, who was appointed by the state, proposed a deal in June in which creditors would accept 10 cents for every dollar they were owed. Two pension funds representing retired city workers are resisting the plan.
Circuit Judge Rosemarie Aquilina has filed orders relating to three lawsuits.
"I have some very serious concerns," she is quoted as saying by the Detroit Free Press.
The paper said Michigan Attorney General Bill Schuette will appeal against the judge's rulings and seek emergency consideration by the Michigan Court of Appeals.
The city had a population of 1.8 million in 1950, but this was less than 700,000 by 2012. Between 2000 - 2010, the city lost 250,000 residents.