Tag Archives: Bankruptcy

The Supreme Court and Puerto Rico — Part Two

As noted in Part One, the Supreme Court had two cases involving Puerto Rico this term.  The first, decided, last Thursday was the more philosophical of the two cases — focusing on Puerto Rico’s status under the Constitution.  The ink was barely dry on that opinion when the Supreme Court issued the second opinion — dealing with the more immediately practical question of how bankruptcy law applies to Puerto Rico’s debt.

As a general matter, the Constitution gives Congress the power to enact a “uniform” law governing bankruptcy — a process that allows private individuals, businesses, and even government to restructure (and in some cases partially reduce) their debts.  As the fact that it is one of the enumerated powers in the original text of the Constitution shows, bankruptcy is not a new concept and predates the United States.  The Bankruptcy Code (Title 11 of the United States Code) is divided into chapters with different chapters applying to different entities and the circumstances of that entity — one for businesses that just want to wind up their affairs, one for businesses that want to try to continue, one for private individuals, and one (which applies here) governing the debts of municipalities (Chapter 9).

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