Puerto Rico is dealing with large amounts of public debt. The island has racked up debt over many years and the Supreme Court recently heard a case dealing with the issue of the bankruptcy and debt according to a March 22, 2016 New York Times article. As a territory, Puerto Rico cannot file for Chapter 9 bankruptcy, the type of bankruptcy a U.S. state would file for if it needed to restructure its debt.
Various ideas have been floated that would help eliminate or lower the islandâ€™s debt. In 2014, Puerto Rico passed the Recovery Act. This law would allow the territoryâ€™s public companies to go into bankruptcy. This is important, as PREPA, the public power utility company, for example, is struggling to pay back debt it incurred. Two courts have struck down the Recovery Act. Some people argue, however, that those decisions did not make sense: U.S. states can file for Chapter 9 bankruptcy, but cannot put their public companies into bankruptcy. Puerto Rico, however, is not a state and, it is argued, should not be bound by a law meant for states, especially when that law deals with stateâ€”not territoryâ€”bankruptcies.
Companies that are owed money by Puerto Rico did not want a dispute to go to court, but preferred to negotiate the status of their investments in Puerto Ricoâ€™s debt with the territoryâ€™s government outside of court. Currently, PREPAâ€™s creditorâ€™s have taken a 15% reduction on the value of the debt. If the Reform Act is upheld by the Supreme Court, then those creditors could see further reductions in bankruptcy.
If you are considering filing for a personal bankruptcy in the State of New York, then contact the law office of Jayson Lutzky, P.C. Mr. Lutzky has over 32 years of legal experience and offers free in-person consultations. Call 718-329-9500 to set up an appointment or visit www.MyNewYorkCityLawyer.com to learn more about Mr. Lutzkyâ€™s office. The office is bilingual in both English and Spanish.