Puerto Rico is not technically a municipality and therefore isn't covered by U.S. bankruptcy law under Chapter 9, but a federal oversight board was created by a bill passed in Congress under President Barack Obama last June that grants the commonwealth bankruptcy-like protections. The request came under Title III of the PROMESA law is an in-court debt restructuring process akin to U.S. bankruptcy protection, as Puerto Rico is barred from traditional bankruptcy because it is a U.S. territory. He added:

We are here to address the problems of Puerto Rico, not to look at the past, and I am convinced that our Island will be able to resume the path of economic development with the correct steps by the Government and the determination of each of its residents.” It is my hope that the Government’s Title III proceedings will accelerate the negotiation process, leading to as much creditor consensus where possible and achieving where necessary a prompt and efficient judicial resolution of any issues or disputes.”

Bondholders have 120 days to challenge the move. Rossello’s fiscal plan for the island, approved by the oversight board in March, forecasts Puerto Rico having only $800 million a year to pay debt, less than a quarter of what it owes.
Puerto Rico files for the largest "local government" bankruptcy in the United States.