When City Manager Bob Deis submits the filing to U.S. Bankruptcy Court, something that was expected to happen quickly, Stockton will become the largest U.S. city to take the step, the Los Angeles Times reported.
The council acted in front of a large group of Stockton residents, the Times said. But most of those in the audience were quiet.
The budget includes deep cuts in city spending, including slashing employee benefits.
"People look at me and say, 'Well he can afford his own insurance,' and I can," former Fire Chief Gary Gillis said. "But how about the ones who mowed the lawns, went in the sewers, typed my letters? We have to protect the most vulnerable among us."
For the past three months, the city has been in mandatory mediation with its creditors, required by a new state law. The last meeting ended at midnight Monday.
Stockton, a city of almost 300,000 people on the San Joaquin River 50 miles south of Sacramento, was caught by the housing boom and bust. The city spent lavishly on a marina, hotel and promenade to lure conventions and people who found the San Francisco area too expensive. Developers built tracts of new homes.
The city has the second-highest foreclosure rate in the country.