DETROIT (WWJ/AP) –  The city of Detroit has reached a tentative deal with one of its key creditors that could remove the biggest stumbling block in the city’s plan to reduce its debts and emerge from bankruptcy protection, according to a federal court filing Tuesday evening.

The joint filing by the city and bond insurer Syncora Guarantee said that they “have reached an agreement in principle” to settle the company’s $400 million claim in the nation’s largest-ever municipal bankruptcy case.

READ MORE: Ribs RnB Music Festival Kicks Off This Weekend In Downtown Detroit

The two sides said they need 48 hours to complete the deal and ask Judge Steven Rhodes for a postponement of the bankruptcy case trial until Friday.

“If this agreement is finalized within this time period as we expect, it will profoundly alter the course of the preceding and the litigation plan of the remaining parties,” the filing said.

“Syncora stood to lose millions and millions of dollars if the Detroit bankruptcy plan were to go through,” said WWJ’s Legal Analyst Charlie Langton. “Earlier reports indicated that Kevyn Orr proposed approximately 10 cents on the dollar and now with this settlement, this is a major breakthrough for the ending of the bankruptcy.”

Syncora Guarantee and fellow bond insurer Financial Guaranty Insurance Co. have been leading a small group of creditors fighting the plan by state-appointed emergency manager Kevyn Orr.

A message was left Tuesday night seeking comment from Orr spokesman Bill Nowling.

Most creditors, including about 30,000 retirees and city employees, have endorsed Detroit’s plan to cut $12 billion in unsecured debt to about $5 billion.

READ MORE: Judge Says Michigan Gov. Whitmer Won't Have To Testify In Abortion Lawsuit

Syncora has strongly opposed the terms, saying that Detroit’s blueprint unfairly discriminated against financial creditors. Syncora and some other creditors have pushed for the city to look into the sale of assets, including city-owned pieces in the Detroit Institute of Arts.

“The judge has hinted throughout this whole trial that they are an unsecured creditor – meaning they get paid basically 10 cents on the dollar – although again – they’re fighting hard to make sure this plan would go down,” said Langton.

Langton says we don’t know the details,”but anytime there is a settlement which has been encouraged by the judge is generally a good thing. Throughout the bankruptcy trial we have heard that all settlements are encouraged – the chief judge of the federal court has conducted mediations throughout this course, and there have been many, many trials.”

The threat to artwork prompted the creation of the so-called Grand Bargain – commitments from the state, major corporations, foundations and others to donate more than $800 million over 20 years meant to soften cuts to city pensions while placing pieces in the DIA into a trust and out of the reach of debtor demands.

Pensioners this summer voted in favor of Orr’s plan, which calls for general retirees to take a 4.5 percent pension cut and lose annual inflation adjustments. Retired police officers and firefighters would lose a portion of their annual cost-of-living raise.

For decades, Detroit paid its bills by borrowing money while struggling to provide the most basic of services for residents. The city, once fueled by the massive auto industry it gave birth to, shrank from 1.8 million people six decades ago to fewer than 700,000 now.

The trial that began Sept. 2 is to help Rhodes determine whether to approve, modify or reject the city’s financial reorganization plan.

MORE NEWS: MDHHS Lifts No-Contact Recommendation In Huron River Chemical Spill

TM and © Copyright 2014 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2014 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.