Friday, July 3, 2020

Senate Approves Amendments to Debt Moratorium Law; excludes Prepa

By on May 16, 2016

SAN JUAN – The Senate passed Monday amendments to the Puerto Rico Emergency Debt Moratorium and Financial Rehabilitation Act that would exclude the Puerto Rico Electric Power Authority (Prepa) from a government moratorium.

The San Juan Capitol. (Photo by Eduardo San Miguel Tió/CB)

The San Juan Capitol (CB Photo/Eduardo San Miguel Tió)

The upper chamber also passed changes to the island’s Homestead Act, known as the Ley de Hogar Seguro, to broaden protections to a person’s property.

Senate Bill 1673, which amends Act 21, the moratorium law, also rephrases the chapter creating the Puerto Rico Fiscal Agency and Financial Advisory Authority ,which would act as fiscal agent for the commonwealth. Gov. Alejandro García Padilla recently designated Secretary of State Jorge Suárez to head the fiscal authority.  

Senate Minority Leader Larry Seilhamer, who said Act 21 destroyed what little credibility the government had, said, “Today the PDP [Popular Democratic Party] majority is approving another technical amendment to correct the inclusion of the Prepa restructuring amendments. Including them was another blow to the government’s credibility.”

Besides excluding Prepa, the bill removes the Puerto Rico Aqueducts and Sewer Authority, the Municipal Financing Authority and the Children’s Trust from the moratorium law.  

While the House passed amendments to Act 21 to exclude general obligation (GO) debt from the moratorium, the Senate majority disagreed with the idea of excluding GOs from the moratorium.  

On the other hand, the Senate also passed the proposed amendments to the Homestead Act, which protects a person’s residence–which comprises the land, home and outbuildings–from forced sale for the collection of debt. In Puerto Rico, a person seeking to protect a residence from a forced sale must have a notary public draft a document to the effect and have it registered in the island’s property registry. Local law does not protect from home foreclosures by a bank or from embargoes sought by the government to collect taxes

Miguel Pereira

Sen. Miguel Pereira

Senate Bill 1175, penned by Sen. Miguel Pereira, broadens the definition of property to be exempt from embargoes or forced sales. His legislation would give homeowners a year to use the money obtained from the sale of a house protected by the Homestead Act to buy a new house that would also be protected by the act. The law’s name would be changed to “The Right to Protect the Main Home, Family Home and Personal Property Act.” However, if the debtor buys a property of lesser value, the difference would not be protected.  

Besides the residence, the proposed law will extend protection to a motor vehicle up to $7,500 or up to $15,000 in the case of a married couple; the value of home appliances and furniture up to $10,000 for individuals and up to $20,000 for a married couple; and the value of jewelry up to $1,500 for an individual and $3,000 for a couple.   

Also exempt will be property used for business or for a profession, up to $10,000 in the case of an individual and $20,000 in the case of a couple, excluding a vehicle’s debt. Also exempt is property needed for medical reasons. The legislation will also protect some of the income yielded by a debtor and the right to unemployment or pension as well as money from a victim’s compensation fund and money obtained from liability insurance up to $25,000.

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