Federal Judge Signs Plan to Resolve Puerto Rico's Bankruptcy in a Record-Setting Move The plan comes nearly five years after Puerto Rico filed for the largest municipal bankruptcy in U.S. history.

By Chloe Arrojado

entrepreneur daily


On Tuesday, U.S. District Court judge Laura Taylor Swain signed a plan for Puerto Rico that sets the record as the largest public-sector debt restructuring deal in U.S. history. According to Swain's ruling, the U.S. territory's debt will be reduced from $33 billion to $7.4 billion — around an 80 percent cut.

"The provisions of the plan constitute a good faith, reasonable, fair, and equitable compromise and settlement of all claims and controversies resolved pursuant to the plan," Swain said in the ruling.

Related: These 2 Franchisees in Puerto Rico Survived Hurricane Maria and Lived to Tell What They Learned

Puerto Rico has had financial problems over the years, declaring bankruptcy in 2017 after it announced it couldn't pay the more than $70 billion debt it had accumulated. The debt, while partly accumulated through mismanagement and excessive borrowing, was further exacerbated by natural disasters and the pandemic.

Under this new debt payment structure, Puerto Rico will only have to pay $666 million a year for the first 10 years, instead of $1.6 billion annually. The territory is expected to have budget surpluses through the mid-2030s but might have problems funding its pension system, which owes its present and future retirees an estimated $55 billion.

In a statement, Puerto Rico governor Pedro Pierluisi said that while this new plan isn't perfect, the debt restructure is a good move for the future of the territory.

"The agreement, while not perfect, is very good for Puerto Rico and protects our pensioners, university and municipalities that serve our people," Pierluisi said. "We still have a lot of work ahead of us."

Related: How Entrepreneurship Is Helping to Save Puerto Rico

Chloe Arrojado

Entrepreneur Staff

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