In 2012, San Bernadino, a city in California, filed for bankruptcy. Of the $280 million debts it owed, $192 million were pension obligations.
In cases where cities cannot pay their debts, they must file for bankruptcy.
Creditors are subject to a restructuring process overseen by the courts, in which creditors are entitled to a share of tax revenues, and ownership of some city property, and have to take a discount on their debts.
Even in bankruptcy, pensions must be paid in full.