Although technically not bankruptcy, this acts much the same as a bankruptcy that you might file, discharging debts and paying others pennies on the dollar. Puerto Rico will propose a plan to repay some of its creditors back a percentage of its debts over several years, probably around 25%. The rest of its debts will be discharged at the end of the plan. Unlike Bankruptcy where a federal judge would over see the plan, balancing the needs of average people against the right of creditors to get paid, Puerto Rico's filing will be overseen by an appointed board that is supposed to balance Puerto Rico's legitimate need to continue providing services to its citizens and restore prosperity against the creditor's right to get paid back. In the end, the government of Puerto Rico is getting a great deal, which will benefit its citizens.
Before Congress passed the PROMESA Act, Puerto Rico was at a serious disadvantage in dealing with its creditors. It could not threaten bankruptcy, like a city or state, and the federal courts were closed off to it. Puerto Rico would take decades to pay off its debts, condemning its citizens to decades of depression and mass exodus to the United States. This benefits no one.
Unlike a bailout where American tax payers would pay for the bad decisions of the government of Puerto Rico, the loss is born by the creditors who continued to fund Puerto Rico after it was clear that the Commonwealth could not pay them back. In the end, someone has to take a loss. Better institutional investors take a loss, than the taxpayers of the United States or the people of Puerto Rico.
For more information read these articles and press release by Speaker Paul Ryan.
FOX NEWS - Puerto Rico requests unprecedented bankruptcy protection for $70B debt
NPR - Puerto Rico Eyes Options As It Faces Debt Deadline — Again
BLOOMBERG - Puerto Rico Files for Historic $70 Billion Debt Restructuring
Speaker Paul Ryan's Press Release
DLAPIPER - PROMESA becomes law: all businesses in Puerto Rico will be affected – top points about this sweeping rescue package
WIKIPEDIA - Puerto Rican government-debt crisis