Stockton, the California city with the nation's second-highest foreclosure rate, is facing a moment of decision on whether to become the biggest city to file for bankruptcy, as a deadline for talks between the city and its creditors approached yesterday, the Associated Press reported. City officials are still hoping to reach a deal that would restructure millions of dollars of debt under a new state mediation law designed to help municipalities avoid bankruptcy, City Manager Bob Deis said. The Stockton City Council is scheduled to decide Tuesday whether to adopt a special budget, which would cover the city's projected $26 million deficit in case of a bankruptcy declaration. California cities are required by law to adopt a balanced budget by July 1 of each year. If mediation fails and council members adopt the special budget, Stockton's lawyers could file for chapter 9 protection in court as early as Wednesday, Deis said.
