Puerto Rico Bankruptcy
Puerto Rico is an island in the Caribbean, which is under unincorporated United States of America territory. Initially, the island was claimed by Spain, but the US took control after the Spanish-American war in 1898 (History.com 1). The island has a mountainous landscape, rainforests, and waterfalls. San Juan is the Capital city of Puerto Rico and is famous for the beautiful beach hotels, casinos, and bars. However, Puerto Rico has faced tough economic times and has since applied for bankruptcy. Bankruptcy is the legally recognized status of which a person or an entity does not have the capability of settling the debts owed to the creditors. In most cases, the bankruptcy is usually declared by a court, and the debtor usually initiates the process.
The filing of a bankruptcy case by the Puerto Rican government means that the creditors will not have the right to sue the Puerto Rico state for failing to pay the debts. Additionally, the bankruptcy will help Puerto Rico to make plans on how to pay its creditors. Puerto Rico owes money to its everyday investors and most of them in clued Wall Street and banks, which had lent money to the government (Worstall 1). Most of these debts are blamed on over-expenditure by the government and severe weather conditions.
According to Worstall, Puerto Rico is unlikely to pay its creditors (1). Puerto Rico spent more money than it had and this plunged the state deeper into financial crisis. In addition, Puerto Rico is not a wholly sovereign state, thus making it hard for any international process of compelling the state to pay its creditors. All creditors who are owed by Puerto Rico are equal, even if some are owed more money than others are. Regardless of the amount owed to each creditor, each of them has the right to be paid their dues.
After Puerto Rico has filed its bankruptcy case, it will determine several factors. Firstly, upon filing, the court will have the jurisdiction in deciding how the investors will be treated. Secondly, the court may rule to have Puerto Rico sell some of its assets to offset some of the debts. Lastly, the case will determine what will happen to Puerto Rico pensioners whose monies have been held by the government in a move to try to rescue the country from the bankruptcy.
The outcome of the bankruptcy case will significantly affect the Puerto Rico Citizens. If the court declares the state bankrupt, the citizens will not be under pressure to pay the creditors what they owe them, but if they are not declared bankrupt, it means that the government will take stringent measures to try to collect more taxes from its citizens. Due to inadequate money to run government services, the citizens are likely to have poor quality services (Bomey 1). In fact, the move may result in a mass exodus of citizens to America’s mainland.
As the citizens of Puerto Rico, they have the right in the bankruptcy filing since they have the power over the government of the day that has plunged the country into such state. Additionally, they have a right, as they are the ones who will be greatly affected by the outcome of the declaration. Thus, it is important for the citizen’s voice to be heard in the determination of the case.