The best possible result would be that this bankruptcy serves to get the city government out of the way. I don't know how to fix it either, but that seems like it would be a good start.
The corruption here runs very deep, indeed. Here's a fun story. True. But not at all uncommon. There's a tiny restaurant in an OK neighborhood not far from where I live. The restaurateur tried his ass off to get a liquor license, because what's a French lunch restaurant without wine service? He paid thousands of dollars only to be told to fuck off, because he wasn't greasing the right wheels. So he let his patrons BYOB. Of course this man thought the with hour response times that the police couldn't possibly have time to regulate whether his patrons were bringing bottles of wine to his humble little establishment. They did. Regular patrols stopped by and harassed this business owner and his customers. Being a good citizen, he told everyone they couldn't bring booze anymore, because of the police, but he continued to serve water in old wine bottles. Then the police harassed him about that, too! This incident is illustrative but by no means unique or remarkable. Basically, my point (and I'm sure you are just a bit sympathetic to it) is fuck these bastards. They could all have their pensions slashed to 0 and I could really give a fuck. They are interested in themselves and don't care about public safety. If the police want me to care about them, then they have to care about me, too. So, in the end, you are right; the same people will be running the city, both elected and non-elected. The question is whether this can be a reset. I don't know that it can, but I don't know that it can't, either. As we talked about the other day, new leadership might have a chance of winning, at least in the mayor's office (not that Bing is a bad mayor, he just isn't up to the task at his age and with his health). That combined with the very high profile corruption cases that have been prosecuted lately may give leaders pause. Maybe.