DETROIT—This automobile capital and onetime music-industry powerhouse could within days become the country's largest-ever municipal bankruptcy case, people familiar with the matter said, as the city's emergency manager accelerates his plan for restructuring nearly $20 billion of long-term liabilities.

The expected bankruptcy filing would come after Kevyn Orr, the emergency manager, failed to reach agreements with enough of the city's bondholders, pension funds and other creditors to restructure Detroit's debt outside of court.

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