States have been turning to austerity measures, tax increases, privatization of services, and renegotiation of collective bargaining agreements. But states will also need relief if their debt burden is so crushing that reasonable efforts at fiscal reform will fail to avoid default without a federal government bailout. Some advocate solving state debt problems by, effectively, extending municipal bankruptcy law to states. That approach brings in excess baggage, however, engendering political opposition and constitutional concerns. There is a simpler solution: enabling states to work out their debt problems with their creditors. Although the main obstacle to a consensual debt restructuring is likely to be the creditor holdout problem, a minimalist legal framework incorporating certain limited bankruptcy protections not only can help states solve that problem but also can help to address the political and constitutional concerns. A minimalist framework also can enable a state to obtain needed liquidity during the debt-restructuring process. Although the federal government could provide this liquidity, the framework would enable the liquidity source to be privatized.