STOCKTON (CBS13) – When they do it, Stockton will become the largest city in America to go bankrupt.

How this happened is not entirely clear, but what is clear is something went horribly wrong with how Stockton city leaders managed or mismanaged taxpayers’ money.

People, who live in the city, fear filing will affect the city services. However, leaders say filing prevents that, but could send a message.

Choosing to file for bankruptcy protects city services from deeper cuts.

But the blow to the city’s already tarnished reputation may negatively affect the local housing market.

“The city’s bankruptcy problems that it’s having with city services, police services and crime could have an impact on residential real estate, probably a short term impact,” said Jeff Michael, University of the Pacific, Director of Business Forecasting Center.

Michael says bankruptcy may make buyers nervous and send house hunters to surrounding communities in the short run. But says bankruptcy may be beneficial in the long run.

Stockton Mayor Ann Johnston says because the city spent three months negotiating with 18 of its creditors and employee union groups, the process will move along quickly.

“We are hopeful that it won’t take more than a year or two years to get out of bankruptcy,” said Johnston. “It all depends on creditors and folks at the table and in the settlement a bankruptcy judge helps us to structure.”

The decision left some retirees in limbo as heath care benefits slashed many waiting to see if they’ll get stuck with monthly sky-high premiums.

“It’s very difficult, my husband and I will probably go without health insurance,” said Joni Anderson, a retired city worker.

The city has until Friday to file and plans on filing electronically.