[bliblah]

I mentioned this in another comment but i'll repeat it.

Due to the complexities of Puerto Rico's status as a commonwealth (i.e. not a State) the island is unable to declare bankruptcy. If they could then this issue could easily be solved and would give the government some leverage as is the case in most cases involving financial institutions taking advantage of these loans like was the case in Detroit and NYC.

To quote the wikipedia article on the topic [1]:

"Puerto Rico or any of its political subdivisions and agencies cannot file for debt relief under Chapter 9, Title 11, United States Code because it applies only to municipalities on the mainland.[55"]

[1]https://en.wikipedia.org/wiki/Puerto_Rican_government-debt_c...

Having lived in PR my most of life and most of my family being lawyers in both the Federal and the local Supreme Court the insight I get from the situation is that unless the White House gets involved or Congress simply amends that single line in the bankruptcy law then the government has really no leverage and these financial institutions (not lenders, but banks who bought the debt from lenders) will get mostly what they want and cripple the island.

[darawk]

> Due to the complexities of Puerto Rico's status as a commonwealth (i.e. not a State) the island is unable to declare bankruptcy. If they could then this issue could easily be solved and would give the government some leverage as is the case in most cases involving financial institutions taking advantage of these loans like was the case in Detroit and NYC.

Was Puerto Rico unaware of this when they took out the loans? Was the law changed out from under them after they had made these deals?

If not, why should we care?

[bliblah]

>Was Puerto Rico unaware of this when they took out the loans?

The fact that it went to the Supreme Court of the US [1] means that it is unprecedented and required the highest court in the land to interpret the law means that no parties were fully aware of how Bankruptcy would hold.

[1]https://www.oyez.org/cases/2015/15-233

[darawk]

I mean, sure, they tried to wriggle out of it any way they could, but the law was clear. And they had every reason to believe that this was a very likely outcome.

[thoughtstheseus]

Yes. Anyone who was involved with these bonds did or should have known. People loved that triple tax exemption too much.

[eyphka]

US States are unable to declare bankruptcy.

[jellicle]

They have no need to. They can simply repudiate their debts, as numerous states have done in the 1840s, 1868, and 1870s.

Puerto Rico's problem is that it is neither fish nor fowl, neither a city which has a legal escape route through bankruptcy nor a state which has a sovereign escape route.