Stockton Hotel, Stockton Califronia | Wikipedia Commons

Stockton is one of the largest cities in the nation to fail financially. The impeeding bankruptcy will affect the city's 300,000 residents. Citizens of Stockton have been struggling with the potential bankruptcy since the announcement in late June 2012. 

U.S. bankruptcy Judge Christopher Klein said Stockton can move forward with reorganizing its debt and based his decision on the high need for Stockton to continue providing basic services in the city. As creditors seek another decision in the case it could be appealed up to the Supreme Court.

One of the largest debts to the city is the $900 million it owes to California Public Employees Retirement System to cover pensions. According to California Law, the pension must be funded, however, the question of whether or not U.S. bankruptcy laws trump California law will be in later bankruptcy discussons.

The decision is expected to open up the opportunity for additional cities in the nation to file for bankruptcy. Currently, six other U.S. cities have filed for bankruptcy including San Bernardino.

For more information on Stockton's bankruptcy case visit the L.A. Times here.

Reach Exectuive Producer Jacqueline Jackson here.