My understanding is that a state cannot voluntarily seek or be forced into bankruptcy in federal court, although a Chapter 7 liquidation of California would entail some amusing trustee sales …

While some politicians may admit that California is, ummm, “underwater,” the bottom line is that California can simply default on its debts. In fact, it may be in California’s best interest to simply “walk away”.

Maybe some enterprising individual will start a web-based business that advises states like California, Nevada, Illinois, and many others, on how to “just walk away” and send the state assembly keys to the bondholders and pensioners (“jingle mail”). Be sure to collect your fee in advance.