A federal judge ruled Monday that Stockton is eligible for bankruptcy protection, despite the objection of creditors who argued the city could come up with more money.
Stockton is the biggest U.S. city to file for bankruptcy.
When it filed last June, Mayor Ann Johnston said there were no alternatives.
"We are extremely disappointed that we have been unable to avoid bankruptcy," Johnston said in a statement at the time.
"This is what we must do to get our fiscal house in order and protect the safety and welfare of our citizens. We will emerge from bankruptcy with a solid financial future.”
Stockton was one of three cities that filed for bankruptcy in California last year.
San Bernardino filed in August. San Bernardino declared more than $1 billion in liabilities and $1 billion in assets in the first of what will be many court filings. Mammoth Lakes also filed.