We've discussed the idea of municipal bankruptcy under Chapter 9 of the Bankruptcy Code but we never mentioned the concept of states declaring bankruptcy.

Well, that's because states can't declare bankruptcy. But the former CEO of one of the world's largest companies seemed confused about that fact.

Carly Fiorina, former CEO of Hewlett Packard and US Senate hopeful, made the comments Monday during a round-table discussion with business leaders at a cement plant in the Inland Empire community of Colton.

We've discussed the concept of municipal bankruptcy in several earlier posts. Chapter 9 of the Bankruptcy Code applies to such bankruptcies and provides that an eligible "municipality" is a "political subdivision or public agency or instrumentality of a State."

The key difference in a Chapter 9 and others, such as a Chapter 7 or 11, is that there is no provision for liquidation and distribution of the municipality's assets to creditors. It is simply a bankruptcy that allows the municipality to reorganize its affairs and do some debt negotiation.

"I think it should always be considered," Fiorina responded, to the question about whether the State of California should file bankruptcy. "Whether that is the right approach now, I don't know. I think bankruptcy, as a possibility, at the very least focuses the mind on what has to be done to salvage a situation."

At least San Diego bankruptcy attorneys know that Fiorina is a proponent of bankruptcy. They have Carly Fiorina's endorsement. But after her comments this week regarding her knowledge of bankruptcy, will she have theirs?