The big states, New York, California, Florida, Illinois, are in deep doo-doo. No, states cannot file for bankruptcy, but most other municipal entities can, and they make up most of the debt in the muni bond market.
I can't give specific advice in this forum (actually, that is about to change. I have withdrawn my membership in FINRA in order to concentrate on my proprietary investments - soon I will have A LOT to specifically say). I can say that, in general, Treasuries are safer than Muni's at this time.
I am in the camp that a currency crisis will happen some time in the next year or two - but it won't be the US$. My bet is that now is the time to hold US$, and that the currency crisis (Greece, Ukraine, United Kingdom, Venezuela... are all very good candidates, much better than the US$ at the moment). I have no idea of WHEN, exactly. You will know it when you see it. In that scenario, the US$ will be the beneficiary of a flight to safety - and everything else will get hurt in US$ terms, with the exception of the U.S. Treasury market.
I reserve the right to change my mind on a dime if the data comes in differently, but I can say with great confidence that the Muni market is very, very challenged at the moment.
Libertariananimal (at) gmail (d0t) com