Jefferson County, with more than 650,000 residents and the state's biggest city, Birmingham, has failed to renegotiate $3.2 billion in debt for a major sewer construction project in the 1990s, Politico reported.
County officials, who are to meet with creditors Thursday, have asked that the sewer debt be reduced by $1.3 billion but have yet to receive a response.
Jefferson County Commissioner Sandra Little Brown predicted last week an 80 percent chance of bankruptcy.
"I am prepared to take whatever steps are deemed necessary to position us to file a Chapter 9 bankruptcy if were unable to reach a satisfactory settlement or an extension of the standstill," commission President David Carrington said.
Chapter 9 bankruptcies, available only to municipalities, allow them to restructure debts.
In March, Carrington had told the BBC, "In all sincerity, I have to say that we are bankrupt right now."
Along with the $3.2 billion sewer debt, the county owes an additional $1 billion and could not possibly pay the debts with tax increases and other ways to generate revenue, Carrington said.