This is the whole point of bankruptcy: when past mistakes collide with present reality, the best way forward is almost always a controlled restructuring of everyone's expectations. Unfortunately, there are various roadblocks in the way of sensible bankruptcies for government entities swamped with pension debt. The major problem is that there is no provision in the bankruptcy code for a state to file for restructuring. Furthermore, there are statutory and constitutional protections for pensions, which are usually the most unsustainable sort of debt for states and municipalities.

One state at the cutting edge of this situation is Illinois: the Illinois Supreme Court has in recent years struck down various measures to attempt to restructure the state's untenable pension obligations. Such measures will prevent the state from making a controlled crash landing and will instead result in the state flying straight into the ground at 600 mph.