As Melissa has noted, the district court has ruled that Puerto Rico's Recovery Act is preempted by the Bankruptcy Code, among other things. I want to amplify one point that she made in her post.

The court's preemption analysis is exceedingly week. In particular, the court never grapples with the 10th Amendment implications of its decision, despite holding that no state can address municipal insolvency, even those jurisdictions that do not allow their municipalities to file under chapter 9. Treating the 10th Amendment as a dead letter seems like something that is about two Chief Justices too late.

In a recent article, I argued that this Constitutional problem, and some statutory conflicts (like the definition of "creditor" in section 101) can be avoided by reading section 903 to only apply to municipalities that are eligible under chapter 9 (because their state governments permit filing, and the Code does not otherwise prohibit entry into chapter 9 – cf. §101(52)).  The district court gives that argument the back of the hand in footnote 19.

The obvious solution is to fix section 101(52) and allow Puerto Rican municipalities into chapter 9. But absent Congressional action, the First Circuit awaits.