Chapter 11 bankruptcy financing permits the team to use $150 million for daily operations and buys time to seek a media deal, the team said in a news release. If approved by a judge, the financing would come in two chunks from a New York investment management company - $60 million up front with the remainder being paid at a later date.
Bankruptcy protection gives the Dodgers a chance to deal with its immediate financing requirements and obtain the necessary funds to ensure the franchise's long-term financial stability.
Experts said the team chose Delaware because the state has traditionally been friendly to businesses in similar cases.
The Fox deal would have provided McCourt with $385 million up front and was vital to a binding settlement reached between him and his ex-wife and former Dodger CEO Jamie McCourt last week. McCourt now faces the potential of missing a June 30 team payroll without the TV funds and that could lead to a MLB takeover.
McCourt said the Dodgers have tried for almost a year to have Selig approve the Fox deal, saying it would make the Dodgers one of the strongest capitalized franchises in the league.
"He's turned his back on the Dodgers, treated us differently, and forced us to the point we find ourselves in today. I simply cannot allow the commissioner to knowingly and intentionally be in a position to expose the Dodgers to financial risk any longer," McCourt said in a statement.
He also said he hopes the Chapter 11 process "will create a fair and constructive environment to get done what we couldn't achieve with the commissioner directly."
Among the 40 largest unsecured claims, totaling about $75 million, listed in the bankruptcy filing are former Dodgers slugger Manny Ramirez at nearly $21 million; Andruw Jones at $11 million; pitcher Hiroki Kuroda at $4.4 million; and the Chicago White Sox at $3.5 million. Longtime Dodger announcer Vin Scully is owed more than $150,000 as part of his contract, court documents show.
Experts believe the bankruptcy proceedings may buy McCourt some time to sort out his finances and even work with MLB, but it's not putting him in a favorable light with the fans.
"When it's said and done, this is the probably the last straw for fans who have not wanted to see him use the franchise as a pawn legally or personally," said David Carter with the USC Sports Business Institution.
Chapter 11 isn't totally unprecedented. Last year, the Texas Ranger declared bankruptcy and made it all the way to the World Series. But this year, the Dodgers are close to last place in the NL West, and fan attendance is dropping dramatically.
"The bankruptcy is not going to help them revive attendance. If anything else, it's one of those last straws where the fans say, 'I really don't need to be showing up,'" Carter said.
As for what happened with the Rangers, many expected the team to be sold, and ultimately, they were sold. Experts don't see such a clear-cut future for the Dodgers.
"I still think it's an open question whether or not we're going to see an auction for the team or whether or not the McCourts can put together a plan where they can keep the Dodgers," said Bob Rasmussen, dean of USC Gould School of Law.
The McCourts have been embroiled in a bitter divorce where their lavish spending habits were detailed in court documents. The former couple took out more than $100 million in loans from Dodger-related businesses, records show.
In April, MLB assumed control of the team. Former Texas Rangers President Tom Schieffer was appointed to monitor the team on behalf of Selig, who said he took the action because he was concerned about the team's finances and how the Dodgers are being run.
The divorce settlement, which is now void due to Selig's decision against the Fox deal, called for a one-day trial in August to determine if the Dodgers are in Frank McCourt's name or if the team should be considered community property and sold.
In a statement released to Eyewitness News on Monday morning through her attorney, Jamie McCourt called the bankruptcy filing "disappointing and disturbing." Lawyer David Boies said the Dodger's financials were "stable and improving" during Jamie McCourt's tenure as CEO of the franchise.
"The rule or ruin philosophy that appears to have motivated today's filing is bad for everyone who cares about, or has an interest in, the Dodgers," Jamie McCourt said in the statement.
A judge ruled in December that a postnuptial marital agreement that gave Frank McCourt sole ownership of the Dodgers was invalid. That cleared the way for Jamie McCourt to seek possession of half the team under California's community property law.
A hearing is scheduled for Tuesday to look into how to allocate the new infusion of incoming cash following the bankruptcy filing.
The Associated Press contributed to this report.