Andy Tod is joining Dundee United until the end of the season.
City have agreed a short-term deal with the Scottish side which will end Tod's limbo.
Tod will start his loan spell at Tanadice on Monday - and he could be thrown straight in for a debut at Celtic two days later when the Scottish Premier League resumes from its winter break.
City managing director Shaun Harvey said: "It's a solution that will suit everyone. The situation wasn't doing anyone any good.
"He came to us from Scotland so he knows the Premier League well. This is a chance for him to play regular first-team football again and then we will see what develops."
Tod played for City's reserves against Liverpool on Thursday - his first game since the appearance saga emerged. Having played 39 games for the first team, he was unable to feature again or the Bantams would have had to cough up a further £25,000 to his previous club Dunfermline.
Dundee United boss Paul Hegarty watched him at Wolves but failed to broker a deal. And it seemed that Hegarty's interest had waned when he signed Italian centre-half Daniele Chiarini, who had been released by Partick Thistle.
But he is still desperate to bolster his rock-bottom squad for their battle against the drop and feels Tod's versatility could be a useful asset.
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