Sec. 13. Territorial relief for unsecured public debt
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The Puerto Rico Oversight, Management, and Economic Stability Act ( 48 U.S.C. 2101 et seq.) is amended by adding after title VII, the following: For purposes of this title: The term collateral means property subject to a security interest. The term financial obligation means an obligation validly owed as of the effective date of this title by a qualifying territory or an instrumentality of a qualifying territory that arises from any— security issued by a qualifying territory or instrumentality of a qualifying territory; loan taken out by a qualifying territory or instrumentality of a qualifying territory; repurchase or swap or other derivative contract entered into by a qualifying territory or instrumentality of a qualifying territory; or guaranty of any security or loan or repurchase or swap or other derivative contract by a qualifying territory or instrumentality of a qualifying territory; and does not include any— claim made by a vendor or service provider that is owed payment by a qualifying territory or an instrumentality of a qualifying territory for a good or service rendered in the ordinary course of business; claim made by or on behalf of a current or former employee of a qualifying territory or an instrumentality of a qualifying territory that is owed payment for a pension or other retirement benefit, or for a health care benefit of any kind; or claim against a qualifying territory or an instrumentality of a qualifying territory for a pending tax refund or tax credit.
The term instrumentality includes— a political subdivision of a qualifying territory; a public agency of a qualifying territory; a public corporation of a qualifying territory; and a banking corporation of a qualifying territory. The term per capita debt of a territory means the quotient obtained by dividing— the aggregate amount of the financial obligations of a territory and the instrumentalities of the territory, which shall not include— Federal debt; and the unfunded liabilities of a pension system of the government of the qualifying territory or any instrumentality of a qualifying territory for the payment of pension and other retirement benefits, or health care benefits of any kind, to current or former employees of the qualifying territory or the instrumentality of the qualifying territory that are owed payment for a pension or other retirement benefit, or for a health care benefit of any kind; by the population of the territory (based on the most recent data available from the Bureau of the Census).
The term proceeds means amounts— acquired from the sale, lease, license, exchange, or other disposition of collateral; and collected from, or distributed on account of, collateral. The term qualifying territory means a territory that meets two or more of the following qualifications: The population of the territory, based on the most recent data available from the Bureau of the Census, has decreased by more than 5 percent during the 10-year period ending on the date of a discharge under section 802.
The territory received major disaster assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act ( 42 U.S.C. 5121 et seq.) during the 5-year period ending on the date of a discharge under section 802. The per capita debt of the territory is greater than $15,000 (as adjusted annually to reflect the percentage change in the Consumer Price Index for all Urban Consumers published by the Bureau of Labor Statistics of the Department of Labor). The term secured financial obligation means any financial obligation to the extent of the value of any collateral pledged by a qualifying territory or any instrumentality of a qualifying territory to secure the repayment of the financial obligation pursuant to a valid and perfected security interest under applicable territorial law, not including— any property acquired or anticipated to be acquired by a qualifying territory or an instrumentality of a qualifying territory after the date of a discharge under section 802, even if that property, when acquired, would have become collateral subject to a security interest; or any proceeds, products, offspring, or profits of the collateral not in existence on the date of a discharge under section 802, unless the property constitutes the proceeds of a collateral to which the security interest has attached as of the date of the discharge.
The term territory has the meaning given such term in section 5(20) excluding subparagraph
(E)of such section. The term unsecured financial obligation means any financial obligation to the extent the financial obligation is not a secured financial obligation. Pursuant to clauses 3 and 4 of section 8 of article I and clause 2 of section 3 of article IV of the Constitution of the United States, any unsecured financial obligation of a qualifying territory or an instrumentality of a qualifying territory that is outstanding is discharged on the date on which a resolution stating that the qualifying territory wishes to discharge the unsecured financial obligations of the qualifying territory and the instrumentalities of the qualifying territory— is adopted by an affirmative vote of more than 50 percent of the members of each house of the legislature of that qualifying territory and is signed by the chief executive of the qualifying territory; or is adopted by an affirmative vote of not less than two-thirds of the members of each house of the legislature of that qualifying territory. A qualifying territory may discharge unsecured financial obligations of the qualifying territory and the instrumentalities of the qualifying territory under this title not more frequently than once during any 7-year period. Such discharge shall prohibit the qualifying territory from discharging, adjusting, or impairing, in any manner or degree including in a proceeding under title III, a claim made by a vendor or service provider that is owed payment by a qualifying territory or an instrumentality of a qualifying territory that is owed payment for a pension or other retirement benefit, or for a health care benefit of any kind. Notwithstanding any other provision of Federal, State, or territorial law, the ability of a qualifying territory to obtain a discharge under this title shall not be stayed, avoided, or otherwise limited by operation of any provision of law or by order of a court, an Oversight Board, or an administrative agency in any proceeding. Except as provided in paragraph
(3)of section 803, nothing in subsection
(a)shall affect the validity and enforceability of any financial obligation of a qualifying territory or an instrumentality of a qualifying territory to the extent that the obligation is a secured financial obligation. Notwithstanding paragraph (1), a secured financial obligation of a qualifying territory or an instrumentality of a qualifying territory may be voidable or otherwise impaired under any other applicable law. Nothing in this title shall be construed to operate as a stay of a pending case brought under title III, or of any act of an Oversight Board appointed under this Act, or to reinstate financial obligations discharged under this title through any procedure under this Act. A discharge under section 802 shall— except with regard to actions brought under section 804, operate as a permanent stay, applicable to all entities and enforceable by the qualifying territory or an instrumentality of the qualifying territory in any court with jurisdiction over an action described in section 804(a), against the commencement or continuation of an action, the employment of process, or an act to collect, recover, or offset any outstanding financial obligation to the extent that the financial obligation is not a secured financial obligation as of the date of the discharge, regardless of whether discharge of that unsecured financial obligation is waived by the qualifying territory; void any outstanding judgment entered on an unsecured financial obligation of the qualifying territory or an instrumentality of the qualifying territory to the extent that such judgment is a determination of liability of the qualifying territory or instrumentality; and if prior to the date of the discharge under section 802, the qualifying territory or an instrumentality of the qualifying territory entered into a security agreement securing a financial obligation, prevent the security interest created by the security agreement from attaching to any property acquired by the qualifying territory or an instrumentality of a qualifying territory after the date of the discharge under section 802, except to the extent that such property constitutes the proceeds of collateral to which the security interest had attached as of the date of the discharge. Any financial obligation is conclusively deemed to be an unsecured financial obligation except to the extent that the holder of that obligation proves that the financial obligation is a secured financial obligation in an action for a declaratory judgment that is filed— in— an appropriate territorial court of the qualifying territory; or a district court of the United States in the qualifying territory; and not later than 180 days after the date of a discharge under section 802. In an action described in subsection (a), the holder of an obligation shall be required to prove by clear and convincing evidence that— the obligation is a secured financial obligation; and any revenues generated after a discharge under section 802 are the proceeds of the collateral securing the secured financial obligation. Notwithstanding title 28, United States Code, a court described in subsection (a)(1) shall have exclusive jurisdiction over an action involving, arising from, or related to the status of a financial obligation as a secured or an unsecured financial obligation under subsection (a), including— any action asserting a taking under the fifth article of amendment to the Constitution of the United States; and any action for declaratory judgment. Any appeal from an action under this section shall be heard solely— for a case filed under subsection (a)(1)(A), in the appropriate territorial court of the qualifying territory; or for a case filed under subsection (a)(1)(B), in the appropriate court of appeals of the United States for the qualifying territory. All parties shall bear their own costs in an action under this section. Any party to an action under this section shall be estopped in other actions from claiming that the party has been deprived of the property of that party by virtue of— a discharge under section 802; or a final ruling in an action described in subsection
(a)that a financial obligation of a party is an unsecured financial obligation. Notwithstanding any other provision of law, a creditor of a qualifying territory or an instrumentality of a qualifying territory that has received a discharge under this title may not avoid or bring an action to avoid, directly or derivatively, any transfer of property made by the qualifying territory or instrumentality. In addition to the relief provided elsewhere in this Act, a qualifying territory or an instrumentality of a qualifying territory, in a civil action described in paragraph (2), may avoid any security interest— securing a financial obligation that would be avoidable by a trustee in a case under chapter 7 of title 11, United States Code, filed on the date of the discharge under section 802 if, notwithstanding sections 101(41) and 109(a) of title 11, United States Code, or any statute of limitations under that title, the qualifying territory or the instrumentality of the qualifying territory were deemed an eligible debtor under such chapter 7; or securing a financial obligation to the extent that the amount owed on the financial obligation exceeds the value of any collateral, subject to restrictions under paragraph (3), securing the financial obligation. A civil action described in this paragraph shall be— brought by a qualifying territory, an instrumentality of a qualifying territory, or a relator on behalf of a qualifying territory or an instrumentality of a qualifying territory not later than 2 years after the date of a discharge under section 802; and filed in— an appropriate territorial court of the qualifying territory; or a district court of the United States for the qualifying territory. For the purpose of determining the value of collateral under paragraph (1)(B), the following shall not be included: Any proceeds, products, offspring, or profits of the collateral not in existence on the date of a discharge under section 802, regardless of whether those proceeds, products, off-spring, or profits of the collateral would become collateral subject to a security interest after the date of a discharge under section 802. Any property acquired or anticipated to be acquired by a qualifying territory or an instrumentality of a qualifying territory after the date of a discharge under section 802, regardless of whether that property, when acquired, would have become collateral subject to a security interest. Any contract right to tax revenues that arise after the date of a discharge under section 802. After a discharge under section 802, the qualifying territory shall promptly— notify the Secretary of the Treasury of the discharge; provide actual notice of the discharge and of the right to bring an action under section 804 to— any known holder of a financial obligation as of the date of the discharge; any known indenture trustee for a financial obligation as of the date of the discharge; any known agent bank for the loan, swap, repurchase agreement, or other derivative of the holder of a financial obligation as of the date of the discharge; and any known financial guaranty insurer of a financial obligation as of the date of the discharge; publish a general notice, in each of the governmental languages of the qualifying territory, of the discharge and of the right to bring an action under section 804 in— not less than 1 newspaper of general circulation of each governmental language published in the qualifying territory; and not fewer than 2 daily newspapers that each have a national circulation in the United States and a general audience; and publish the general notice described in subparagraph
(C)in the newspapers described in subparagraph
(C)not less than once each week during the 3-week period beginning on the date on which that general notice is first published. On the date on which the Secretary of the Treasury receives the notice described in paragraph (1)(A), the Secretary of the Treasury shall promptly cause to be published in the Federal Register a notice of that discharge and of the right to bring an action under section 804. A holder of a financial obligation shall be presumed to have received adequate notice of a discharge under section 802 if, during the 180-day period beginning on the date of a discharge under section 802, a qualifying territory provides actual notice of the discharge and of the right to bring an action under section 804 to— the holder of the financial obligation as of the date of the discharge; an indenture trustee for the security of the holder as of the date of the discharge; or an agent bank for the loan, swap, repurchase agreement, or other derivative of the holder of a financial obligation as of the date of the discharge. The presumption described in subparagraph
(A)may be rebutted by clear and convincing evidence that the holder of the financial obligation did not receive adequate evidence. A financial guaranty insurer shall be conclusively deemed to have received adequate notice of a discharge under section 802 if, during the 180-day beginning on the date of a discharge under section 802, the financial guaranty insurer receives actual notice of the discharge and of the right to bring an action under section 804. This title shall not apply to American Samoa, the Commonwealth of the Northern Mariana Islands, Guam, or the Virgin Islands of the United States. This title shall take effect 60 days after the date of the enactment of the Amendments to PROMESA Act of 2020 . . The table of contents of the Puerto Rico Oversight, Management, and Economic Stability Act ( 48 U.S.C. 2101 et seq.) is amended by inserting after the items relating to title VII the following: TITLE VIII—TERRITORIAL RELIEF Sec. 801. Definitions. Sec. 802. Relief through exercise of the power to regulate commerce, the bankruptcy power, and the territorial power. Sec. 803. Effect of discharge. Sec. 804. Actions related to the status of financial obligations. Sec. 805. Notice of discharge. Sec. 806. Applicability. Sec. 807. Effective date. .
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