Schumer bill would allow Puerto Rico to file for bankruptcy
U.S. Senator Charles Schumer (D-New York) said he has introduced legislation aimed at helping Puerto Rico out of its fiscal mess by allowing the island to seek bankruptcy protection in U.S. courts, something it is currently prohibited from doing.
Together with U.S. Senator Richard Blumenthal (D-Conn.) Schumer introduced the Puerto Rico Chapter 9 Uniformity Act on Wednesday, legislation that would grant Puerto Rico the authority to allow its municipalities and public utilities to readjust their debts under the supervision of a bankruptcy court.
The Puerto Rico Chapter 9 Uniformity Act would provide Puerto Rico with the same authority granted to all U.S. states that enables its municipalities and public utilities to restructure their debt, according to Schumer.
The legislation is necessary to stop a financial disaster, Schumer said.
“We can either do the right thing and give Puerto Rico the bankruptcy option it needs and deserves, or we can risk a disaster on the island and billions in bailout payments later,” Schumer said. “Allowing Puerto Rico’s municipalities to go through the bankruptcy process, just like other American municipalities, is the right way to begin untangling the fiscal mess on the island, and I hope both parties will come together to get this done.”
Puerto Rico and its agencies hold roughly $73 billion in debt, Schumer said. Puerto Rico is a commonwealth of the U.S.
Blumenthal said the bill is designed to “prevent a humanitarian and financial catastrophe; a clearly avoidable disaster.”
If nothing is done, millions of people, both in Puerto Rico and in the mainland U.S., will be hurt, Blumenthal said. “Creditors, investors, ordinary citizens, all will be harmed if the Congress fails to act. This measure is not a bailout, involving not a dime of federal funds. It enables an orderly, rational restructuring of debt, instead of a financial free for all and potential free fall,” he said.
Joining Blumenthal and Schumer as co-sponsors are U.S. Senators Kirsten Gillibrand (D-New York), Bill Nelson (D-Fla.), Elizabeth Warren (D-Mass.), Robert Menendez (D-New Jersey), Cory Booker (D-New Jersey), Harry Reid (D-Nev.), Chris Murphy (D-Conn.), Bernie Sanders (I-Vermont), Martin Heinrich (D-New Mexico) and Mazie Hirono (D-Hawaii).
While the government of Puerto Rico is treated like a state for every other purpose of the Bankruptcy Code, a 1984 law called the Bankruptcy Amendments and Federal Judgeship Act expressly excluded Puerto Rico from Chapter 9. This means the government of Puerto Rico has not been granted the power to authorize its municipalities to enter into Chapter 9 proceedings in U.S. courts.
But at the same time, federal courts have held that Puerto Rico cannot pass its own bankruptcy rules, leaving the island in a bind.
The sorry financial situation has led many Puerto Ricans to leave the island and move to the U.S. mainland, according to a 2014 report on CNN.
Puerto Ricans were granted U.S. citizenship in 1917 through legislation known as the Jones-Shafroth Act.
The 2010 U.S. Census showed that there were over 1 million Puerto Ricans living in New York State. A 2014 New York Post article, which cited figures from a study by the Center for Latin American, Caribbean and Latino Studies at the City University of New York, counted 719,400 Puerto Ricans living in New York City.
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