I could be wrong, but the following from 11 USC 101 says a governmental unit (it doesn’t exclude states) for the purposes of loans and pensions may be considered a ‘person’ and therefore can file bankruptcy. A municipality, as defined below, is a subdivision of a state but different then a ‘governmental unit’.
“(41) The term “person” includes individual, partnership, and corporation, but does not include governmental unit, except that a governmental unit that–
(A) acquires an asset from a person–
(i) as a result of the operation of a loan guarantee agreement; or
(ii) as receiver or liquidating agent of a person;
(B) is a guarantor of a pension benefit payable by or on behalf of the debtor or an affiliate of the debtor; or
(C) is the legal or beneficial owner of an asset of–
(i) an employee pension benefit plan that is a governmental plan, as defined in section 414(d) of the Internal Revenue Code of 1986; or
(ii) an eligible deferred compensation plan, as defined in section 457(b) of the Internal Revenue Code of 1986;
shall be considered, for purposes of section 1102 of this title, to be a person with respect to such asset or such benefit.”
“(40) The term “municipality” means political subdivision or public agency or instrumentality of a State.”
