It sounds like a load of bullshit if you presume that the average citizen does anything about it in the first place , and if you don't understand what a bankruptcy means for a city. Local voter turnout is abysmally low in most major cities The most active voters tend to vote because they are pushed to by an interest group. That is why in places like California, public unions have such a massive dominance over state politics – that they were able to negotiate pension plans that were clearly unsustainable – and politicians all to ready to accept political support today for the financial problems of tomorrow. Hence why in the graph I show California is a massive leader in pension liabilities.
However, a bankruptcy doesn't mean that a city get's rid of it's debts, instead it means that the city no longer has to pay it's creditors while it renegotiates how it's going to pay that debt. Those debts still exist, mind you, but they can be renegotiated.
Since Bankruptcy often comes with the ability for the city to massively restructure it's debts (at the expense of some creditors over others), most creditors tend to be open to negotiations. So this is often a good solution for an untenable situation.
I consider it a check on "interest democracy" which is what I call many elections in major cities. That is, the major voting participant is a person who has an incredibly vested interest in voting, i.e. urged by a union, a corporation, a business, non-profit, etc, because of a very specific promise to them.
It's also why I am a big believer of instituting electoral college like system in big states like California and Texas, so state politics won't be entirely governed by a highly concentrated interest blocs. It forces politicians to contend with and campaign in places out of these densely grouped interest blocs.