Puerto Rico has already defaulted twice, but this next default is going to shake the muni bond market.

Negotiations to restructure roughly $9 billion of the debt of Puerto Rico’s power company collapsed late Friday, raising the prospect of the biggest default yet in Puerto Rico’s deepening debt crisis.
Prepa is one of the largest single issuers of Puerto Rico’s $72 billion in debt, most of it in the form of municipal bonds, which are widely held through mutual funds and other investment firms.

Prepa does not take in enough cash to cover its costs, so unless agreements are reached Puerto Rico is headed for serious trouble.

In a recent congressional hearing, Prepa’s chief restructuring officer, Lisa J. Donahue of AlixPartners, said it “would, in my opinion, be a disaster” if Prepa failed to make those payments. She said its fuel shipments could then stop, and if it ran out of fuel to generate power, “blackouts across the island” would result. The government here has been desperately trying to court new investment and revive the island’s shrinking economy. Widespread blackouts could undo those efforts.

While this is disastrous for Puerto Rico, why should you care?
For starters, the longer this crisis goes on, the more economic harm is done and the more expensive it becomes.

Those on the right tend to think that borrowers borrowed too much, and that they should be punished for doing so. Those on the left argue that it’s the lenders who lent too freely, and that they should share in the burden by accepting less than full repayment. Of course, when you’re dealing with a legitimately insolvent entity, these moral arguments are beside the point. If there’s simply not enough cash to pay back what is owed, another arrangement has to be made.

When there is no money, there is no money. End of story. Unless Republicans want to send Puerto Rico into an African-style debt trap that they can never escape, then Puerto Rico will need access to bankruptcy.
Besides, bankruptcy is not some sort of Wall Street bailout. No one ever said, "You are so lucky to file for bankruptcy."