09.29.15

SCHUMER: IN MIDST OF DIRE FISCAL CRISIS, PUERTO RICO NEEDS IMMEDIATE ACCESS TO BANKRUPTCY PROTECTIONS; SENATOR CALLS FOR SWIFT FEDERAL ACTION ON ‘PUERTO RICO CHAPTER 9 UNIFORMITY ACT,’ WHICH WILL GIVE PUERTO RICO—A U.S. TERRITORY— SAME CHAPTER 9 AUTHORITY AS U.S. STATES

With Over 1M Puerto Ricans Living in New York, Schumer Has Been Strong, Outspoken Leader On Providing Puerto Rico & Its Residents With Equitable Treatment;  Schumer is Sponsor of Legislation That Would Give Puerto Rico Authority to Access Chapter 9 Bankruptcy Protections  & Schumer is Sponsor of Legislation That Would Finally Treat PR Fairly in Federal Health Programs – Medicare & Medicaid

Schumer Calls for Immediate Action, Including a Hearing in the Senate Judiciary Committee, On the Senator’s Puerto Rico Chapter 9 Uniformity Act; Senator Says Passage of Legislation is Critical, As Puerto Rico Seeks to Resolve Its Outstanding Debt Obligations and Stabilize Its Economy

Schumer: Puerto Rico Deserves Fairness and Access to All Tools Necessary to Fix Economic Crisis – Including Access to Chapter 9 and Fair Health Care Reimbursements

U.S. Senator Charles E. Schumer today publicly called for a Senate Judiciary hearing in the coming weeks on the “Puerto Rico Chapter 9 Uniformity Act,” which would give Puerto Rico the authority to access Chapter 9 protections offered under the Federal Bankruptcy Code. Schumer publicly made his push at today’s Senate Finance Committee’s hearing on The Financial and Economic Challenges in Puerto Rico.  Earlier this year, Schumer introduced the legislation to address the growing fiscal crisis in Puerto Rico by granting Puerto Rico the authority to allow its municipalities and government-backed corporate debtors to readjust their debts under the supervision of a bankruptcy court. “The Puerto Rico Chapter 9 Uniformity Act” will provide Puerto Rico with the same authority granted to all U.S. states that enables its municipalities and public utilities to restructure their debt. Schumer today said that immediate movement on this legislation is necessary and should begin with the Senate Judiciary Committee holding a hearing on the bill.

“We have a basic, American responsibility to aid all American citizens in times of crisis, regardless of where they live. That’s why it’s so important for Congress to address several of the most pressing issues facing the people of Puerto Rico, including the passage of my legislation which will allow Puerto Rico to access Chapter 9 bankruptcy protections. If we fail to offer Puerto Rico assistance now, the economic conditions could worsen and ultimately lead to a humanitarian crisis - a problem that will no longer be contained to the Island. We need to be concerned with these issues not only because Puerto Ricans are part of the American family and deserve the quality of life that we all expect, but also because our failure to act now could result in a Puerto Rican financial crisis that becomes a drag on our entire economy,” said Senator Schumer. “I am urging Congress to pass the ‘Puerto Rico Chapter 9 Uniformity Act’ immediately while we continue to work toward finding policy solutions that will help Puerto Rico address its many economic issues over the long term.”

Schumer has been an outspoken advocate for Puerto Ricans living both in Puerto Rico and on the mainland. Earlier this year, Schumer also introduced the “Improving the Treatment of the U.S. Territories under Federal Health Programs Act of 2015,” which will treat U.S. Territories more like states within federal health programs. Right now, Puerto Rico is treated differently in health programs like: Medicare and Medicaid. Schumer has said that Puerto Rico should be offered the same treatment under federal health programs as states currently receive. Schumer is urging Congress to pass this legislation as quickly as possible.

There are 3.5 million Puerto Ricans living on the Island today, and 5.2 million living in the United States, including over 1 million in New York State. Schumer said that as the economic situation in Puerto Rico continues to deteriorate, residents will continue to be compelled to flee their homeland.  Schumer went on to say that, the population shift from Puerto Rico to mainland U.S. is likely to continue as their economic situation worsens, until the only ones left are those that do not have the resources or ability to move. Schumer explained that unfortunately, this situation has the real potential to lead to a humanitarian crisis if nothing is done.

Specifically, The Puerto Rico Chapter 9 Uniformity Act of 2015 would:

  • Amend the Bankruptcy Code to treat Puerto Rico as a State for purposes of Chapter 9.
  • Give the Puerto Rican government the ability to authorize its municipalities and public corporations to enter Chapter 9 proceedings.

Additional Background

The Commonwealth of Puerto Rico and its agencies currently hold roughly $73 billion in debt. The public electric utility on the island, PREPA has $9 billion of debt outstanding. After narrowly avoiding a default on July 1, it faces another payment on January 1, 2016. A PREPA default could result in diminished services and severe humanitarian consequences.

Chapter 9 of the U.S. Bankruptcy Code provides a legal mechanism through which a “municipality,” or a “political subdivision or public agency or instrumentality of a State,” may restructure its debts. Currently, any state may authorize its municipalities to file a Chapter 9 petition.

While the government of Puerto Rico is treated like a state for every other purpose of the Bankruptcy Code, the 1984 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. At the same time, federal courts have held that Puerto Rico cannot pass its own bankruptcy rules. The Puerto Rico Chapter 9 Uniformity Act would amend Section 101(52) of title 11 of the United States Code in order to treat Puerto Rico as a State for purposes of chapter 9 of such title relating to the adjustment of debts of municipalities. The Puerto Rican government would have the ability to authorize its municipalities to enter Chapter 9 proceedings. This power would apply to debts, claims, and liens created before, on or after the date of enactment.

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