Question: so counties are allowed to go bankrupt, but not states? States can not print money, and many states including Arizona where I live are coming up short paying for essential services.
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That's correct. Counties and municipalities can go bankrupt under Chapter 9.
http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/ch...
There is no provision for states. It's an unprecedented situation so I don't think anyone can predict what will actually happen when they inevitably run out of cash.