The U.S. Supreme Court case Puerto Rico v. Franklin California Tax-Free Trust (2015) revolved around the question of whether or not Puerto Rico could pass its own bankruptcy laws to restructure its public utility debt, which was in direct conflict with federal bankruptcy law under Chapter 9 of the Bankruptcy Code. The court ruled against Puerto Rico, stating that while it is excluded from using Chapter 9 itself due to a 1984 amendment to the Bankruptcy Code, this does not grant it exemption from other provisions within that code - specifically those preventing states from passing their own insolvency laws for municipalities. Therefore, despite being unable to use Chapter 9 proceedings themselves because they are neither a state nor municipality as defined by said chapter, Puerto Rico also cannot create their own alternative restructuring mechanism.

In the dissenting opinion for Puerto Rico v. Franklin California Tax Free Trust, Justice Sonia Sotomayor, joined by Justice Ruth Bader Ginsburg, argued that the majority's interpretation of the Bankruptcy Code was too narrow and did not take into account Congress' intent when it amended the code in 1984. They contended that Congress never intended to leave Puerto Rico without any legal mechanism to restructure its debt. The dissenters believed that if a state or territory is barred from enacting its own bankruptcy laws under Section 903(1), then it should be allowed access to federal bankruptcy laws under Chapter 9 as a matter of fairness and logic. In their view, this would better align with Congressional intent and provide an equitable solution for territories like Puerto Rico facing financial crises.