Under prior law, a municipality could file a petition and prosecute to completion bankruptcy proceedings under federal law, subject to certain requirements. Assembly Bill 506 prohibits a local public entity from filing under federal bankruptcy law unless the local public entity has participated in a specified neutral evaluation process with interested parties, or the local public entity has declared a fiscal emergency and has adopted a resolution by a majority vote of the governing board at a noticed public hearing that includes findings that the financial state of the local public entity jeopardizes the health, safety, or well-being of the residents of the local public entity's jurisdiction or service area absent bankruptcy protections.

Enacted October 2011. Link to bill: http://www.leginfo.ca.gov/pub/11-12/bill/asm/ab_0501-0550/ab_506_bill_20111009_chaptered.html