Before the July filing, nearly 40 cents of every dollar collected by Detroit was used to pay debt, a figure that could rise to 65 cents without relief through bankruptcy, according to the city.
Orr praised the judge's ruling and pledged to "press ahead." He also acknowledged that pensions will be a sensitive issue because they represent a "human dimension," with some former employees getting by on less than $20,000 a year.
The judge spoke for more than an hour in a packed courtroom, reciting Detroit's proud history as the diverse, hard-working "Motor City" devoted to auto manufacturing. But he then tallied a list of warts: double-digit unemployment, catastrophic debt deals, thousands of vacant homes, dilapidated public-safety vehicles and wave after wave of population loss.
Behind closed doors, mediators led by another judge have been meeting with Orr's team and creditors for weeks to explore possible settlements.
The judge has told the city to come up with a plan to exit bankruptcy by March 1. But Orr says he would like to have one ready weeks earlier.
The city is so desperate for money that it may consider selling masterpieces from the Detroit Institute of Arts as well as a water department that serves much of southeastern Michigan.
"We need to recognize that this decision is a call to action," Gov. Rick Snyder, who supported the bankruptcy filing, said Tuesday. "We are confronting fiscal realities that have been ignored for too long."
Minutes after the ruling, a lawyer for a city union said she would appeal. City officials got "absolutely everything" in Rhodes' decision, she told reporters.
"It's a huge loss for the city of Detroit," said Sharon Levine, an attorney for the American Federation of State, County and Municipal Employees, which represents half of city workers.