Commissioners and attorneys have spent more than two years in negotiations with creditors. They voted to file for bankruptcy—which surpassed Orange County, Calif.'s $1.7-billion filing in 1994, the largest municipal bankruptcy on record at the time—after they could not reach an agreement with creditors.

"Every part of the settlement is the product of very intense, hard-fought, arm's-length negotiations," Carrington said. "All major stakeholders in the case are or are expected" to back the workout plan, he added.

Major creditors, such as banks, insurance companies and hedge funds, will get about $1.84 billion of the estimated $2.4 billion they are owed.

JPMorgan Chase & Co., the biggest creditor—which was implicated in a sewer-financing-related bribery scandal that involved county officials—also will take the biggest hit, getting $375 million of $1.22 billion. It agreed to a U.S. Securities and Exchange Commission settlement in 2009, paying the county $75 million and giving up more than $675 million in claims.

If the plan is approved, most of the other creditors will recover about 80%.

Had the major creditors not agreed, the alternative would have been dismissal of the case and "the proverbial 'race to the courthouse,' " since a municipality cannot undergo a liquidation, Carrington said in a disclosure filed with the plan.