The U.S. territory of Puerto Rico is having a debt crisis. According to reports, it owes around $72 billion that it cannot pay back. However, a new bill, put forth with the support of the democratic party, proposes that Puerto Rico be allowed to declare bankruptcy on that total, which would help alleviate its debts.
A Restructuring Plan
It's important to note that the bill is not asking for all of the debts to be forgiven or eliminated. Instead, it asks for a restructuring plan to be created, along with a fiscal oversight board. The island would continue to pay back the debt on the approved plan.
One of the senators who supports the bill, Bob Menendez, noted that there are 3.5 million American citizens who are currently living in Puerto Rico, calling on Congress to consider them when making the decision. He said that their time was running out and that immediate action was needed. He further noted that Puerto Rico needs tools to restructure the debt, which the bill would provide.
Opposition and Deadlines
Though an official statement has yet to be given, it's thought that Republicans are going to oppose the bill. In the past, the Republican party has not been interested in allowing Puerto Rico to use bankruptcy on such large sums. On top of that, there are investment firms that have large holdings in some of this debt, and they are not likely to be pleased with the bill, either. They would prefer that the debt is repaid as was originally outlined. The deadline for the bill is March 31, and the Republican party is working to create a competing bill regarding the debt crisis by that time.
Things need to happen quickly. The first defaults on the debt could strike by May.
This bill shows both how complex bankruptcy cases can be and how many different options there are. People sometimes assume that filing for bankruptcy means paying nothing back, but this shows how restructuring can be used so that debts are paid on a different schedule than was originally set forth.
While this story looks at a large case with high amounts of debt, it's important for anyone who is facing substantial debt to know what bankruptcy options they have.
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