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house Bill H.R. 870

If Puerto Rico’s Government Declares Bankruptcy, Should It Get the Same Protections as States and Cities?

Argument in favor

Let’s be clear — this is not a bailout, and doesn’t authorize a bailout. All this bill does is allow Puerto Rico to use the same bankruptcy process available to states and cities.

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07/10/2015
"Puerto Rico should be able to negotiate with its creditors just as states can under the U.S. Bankruptcy code." [vox.com]
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JebBush's Opinion
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07/10/2015
“Puerto Rico should be given the same rights as the states. In order for Puerto Rico to eventually become a state, it must begin by being treated as a state.” - http://www.bloomberg.com/politics/articles/2015-04-28/bush-says-puerto-rico-agencies-should-have-access-to-bankruptcy
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Kristin's Opinion
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12/22/2015
It's not a bailout--did people read anything besides the title??? And 61% voted yes to become a state in 2012 but congress has done NOTHING to move it forward. The United States bears a large moral obligation to Puerto Rico. We started a war of aggression to steal it from Spain, and treated it like dirt for five decades, imposing U.S. law and ignoring several votes for independence. Puerto Ricans only got citizenship in 1917 so they could be drafted to fight in World War I. Educate yourself before you vote, people!! Good grief I thought that's what this app was for!!
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Argument opposed

Allowing Puerto Rico to go through Chapter 9 bankruptcy will lead to it not repaying its creditors in-full, which will have a broader economic impact on investment and pension funds.

Zenra123's Opinion
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08/05/2015
Puerto Rico does not pay any taxes to the federal government. Why should the States pay taxes to bail out Puerto Rico, when we could be using our Tax Dollars to pay for infrastructure, education, and healthcare?
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Bradley j.'s Opinion
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07/29/2015
Puerto Rico has time and time again voted not to be a state of the United States therefore I believe that they should be on their own if they file bankruptcy.
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Mdurham44's Opinion
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08/05/2015
Why must the USA prop up every failed economic system this side of the Atlantic?!
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What is House Bill H.R. 870?

This bill would allow Puerto Rico to receive the same treatment that states and cities would under Chapter 9 of the bankruptcy code.


By doing so, Congress would negate a 1984 change to the bankruptcy code that excluded Puerto Rico from a provision allowing states or their municipalities to enter Chapter 9 bankruptcy. That change has left Puerto Rico without any practical options to deal with its debt crisis after a federal court ruled that the commonwealth’s law allowing its cities and public entities to declare bankruptcy was unconstitutional.

This legislation would take effect immediately after enactment, and apply to all debts past, present, or future. It also includes a severability clause — meaning that if any portion of the bill by itself is found to be unconstitutional, the rest of the legislation would not be affected.

Impact

People who own mutual funds or bonds involving Puerto Rican bonds — particularly those of its public corporations, Congress, and the Puerto Rican government.

Cost of House Bill H.R. 870

A CBO cost estimate is unavailable.

More Information

In-Depth: The sponsor of this legislation, Rep. Pedro Pierluisi (D-PR), has emphasized the broad support that this legislation enjoys — including endorsements by the editorial boards of Bloomberg, the New York Times, the Washington Post. Additionally, the Fitch Ratings agency said extending Chapter 9 bankruptcy protections to Puerto Rico would be a “positive and important development” for the commonwealth and its creditors.


Of Note: Puerto Rico’s governor Alejandro Garcia Padilla has said that the commonwealth’s $72 billion debt burden is “not payable” and could trigger a “death spiral” that drives its economy into a severe recession. Bankruptcy would assist Puerto Rico in restructuring its debt to a more sustainable level, but without Congress allowing it to pursue bankruptcy it would be forced to default.

On August 3, 2015 Puerto Rico defaulted for the first time in its history after managing to pay only $628,000 of a scheduled debt payment of $58 million. Its inability to pay the full amount resulted from a failure of the commonwealth's legislature to appropriate the necessary funds, and "reflects the serious concerns about the commonwealth's liquidity."

There have been several notable Chapter 9 bankruptcies over the years — including by Detroit and Stockton, California — but Puerto Rico’s bonds have been valued at about eight times those issued by Detroit.


Media:

Summary by Eric Revell
(Photo Credit: Flickr user vxla)

AKA

Puerto Rico Chapter 9 Uniformity Act of 2015

Official Title

To amend title 11 of the United States Code to treat Puerto Rico as a State for purposes of chapter 9 of such title relating to the adjustment of debts of municipalities.

bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
  • The house has not voted
      house Committees
      Committee on the Judiciary
      Antitrust, Commercial and Administrative Law
    IntroducedFebruary 11th, 2015
    "Puerto Rico should be able to negotiate with its creditors just as states can under the U.S. Bankruptcy code." [vox.com]
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    Puerto Rico does not pay any taxes to the federal government. Why should the States pay taxes to bail out Puerto Rico, when we could be using our Tax Dollars to pay for infrastructure, education, and healthcare?
    Like (21)
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    “Puerto Rico should be given the same rights as the states. In order for Puerto Rico to eventually become a state, it must begin by being treated as a state.” - http://www.bloomberg.com/politics/articles/2015-04-28/bush-says-puerto-rico-agencies-should-have-access-to-bankruptcy
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    Puerto Rico has time and time again voted not to be a state of the United States therefore I believe that they should be on their own if they file bankruptcy.
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    Why must the USA prop up every failed economic system this side of the Atlantic?!
    Like (8)
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    It's not a bailout--did people read anything besides the title??? And 61% voted yes to become a state in 2012 but congress has done NOTHING to move it forward. The United States bears a large moral obligation to Puerto Rico. We started a war of aggression to steal it from Spain, and treated it like dirt for five decades, imposing U.S. law and ignoring several votes for independence. Puerto Ricans only got citizenship in 1917 so they could be drafted to fight in World War I. Educate yourself before you vote, people!! Good grief I thought that's what this app was for!!
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    If we consider things territories they are our responsibility
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    Why should WE bail them out? They've had plenty of chances to become a State and have never taken advantage of those chances.
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    Merely disagreeing because Hillary, Martin, and Jeb are all for it.. So it must be a terrible idea!
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    They are not a state, and have chosen to have said status. Can't have best of both worlds.
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    Until they become a state, they do not get the same rights as a state.
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    They aren't a state, so no, state rights don't apply to them. Not to mention the Federal Government shouldn't handle anyone's debt until they handle their own. If a place can't be productive enough to survive, then let's get the citizens of that place to a productive place so they can actually help the world a little
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    They have voted time and again not to be a state!
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    They don't pay taxes, therefore they are not entitled to the protections of this country. They have always voted not to become a state and shouldn't get any of the good with out the bad too.
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    Why give state right away without the cost of being a state? A solution is to have them be a state in the USA.
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    Not a state by choice. No states rights by default. Why debate it. If they join the union, then maybe it's an option.
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    First, become a state. Then ask for rights as a state.
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    They are not a state and have shown in the past they do not want to be a state. Now they are in trouble they want us to help them out. They made their bed, let them sleep in it.
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    Declaration of bankruptcy receives specific protections as designated in the particular category (chapter) which is applicable. What is not clear in the above that should require new thinking? I would say that bankruptcy law was abrogated badly in the GM and Chrysler reorganizations precisely because the Obama regime set out to rapaciously take advantage of the crisis for its own aggrandizement. The troubling fallout from that rogue intervention is to call in question the tradition that bondholding is intrinsically a safer investment than shareholding.
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    It is not a state. We can't afford to bail them out. Our national debt is ridiculous already. We should spend the money to rebuild our military that Obama has practically annihilated.
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