Quote:
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The legal case is not technically considered a bankruptcy filing under the federal code that governs municipal cases, but it's similar. Instead, it was filed through a bankruptcy-like mechanism dubbed Title III of legislation authorized by Congress and signed into law by President Obama in 2016.
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https://www.usatoday.com/story/money...tcy/101243686/
The Congress and Obama made a new law that will control Puerto Rico's insolvency. SO?
Bottom line -- they will be able to adjudicate the discount or the termination and release of the territory's debt. Governments just make new laws.
What matters is that the decisions made will influence the risk status and the corresponding interest rates of state and municipal debt. If your city or county wants to pay for a road -- they sell bonds in the public markets. If a state government wants to build a new university the state will sell bonds in the public markets. The taxpayers of the state or city issuing the bonds will repay these bonds. Bond rates affect tax rates. Higher interest rates on bonds require tax rate increases or government spending cuts -- states and cities cannot just print more money like the US Federal government does.