Nottingham City Council is considering issuing a section 114 notice – effectively declaring itself bankrupt.
Council leader David Mellen said the body’s chief financial officers could make the move as the authority tries to balance its books.
A report said the authority is set for a £23m overspend in the 2023-24 financial year.
By issuing a section 114 notice, the council would have to halt all new spending other than for services it must provide by law.
This includes social care, waste collections, and protecting vulnerable people.
Other councils to have issued such notices include Croydon Council, and more recently, Birmingham City Council.
Mr Mellen said the council was “working hard” to balance the budget, but said the move was an option if the council needed to take further measures to reduce spending.
“We do need to take measures, and we’re already doing so, to do what we can to balance that budget in extremely trying times,” he said.
“At the end of the day, you can’t cut things beyond the bone or the city stops working in the way that it should be.”
Mr Mellen said local authorities were “not properly funded” and blamed the government for taking away £100m from Nottingham City Council every year since 2010.
Expecting councils to deal with increasing costs and pressures was “unrealistic”, he added.
Mr Mellen said financial “mistakes” such as the failed Robin Hood Energy project were “small in comparison to the year-on-year reduction” of funding.
He confirmed the council would continue to pay staff but would have to stop recruiting for all non-urgent roles.
The council will also look at the potential sale of any asset worth more than £1m.
Documents show the Labour-run authority has so far managed to bring an in-year deficit of £26m down to just over £23m.
It had previously stood at £57m, the Local Democracy Reporting Service said.
If a balanced budget cannot be set, Mr Brown has the power to issue a section 114 notice.
Senior councillors will discuss the financial issues at a meeting of the executive board on 21 November.