Treasury Secretary Jacob Lew said Tuesday the Obama administration isn't contemplating a federal bailout for Puerto Rico as the island territory faces a cash crunch, but he offered the administration's most explicit call yet for Congress to revise bankruptcy rules and facilitate debt restructuring for the commonwealth.

Mr. Lew, responding to a series of questions submitted earlier this month by Senate Finance Committee Chairman Orrin Hatch (R., Utah), warned that Puerto Rico's yearslong economic contraction would worsen without access to chapter 9 of the U.S. bankruptcy code.

"Puerto Rico's fiscal situation is urgent, and I believe it requires the immediate attention of Congress," Mr. Lew said. Without an established legal option to restructure debts, the outcome would be "chaotic, protracted and costly both for Puerto Rico and more broadly for the United States," he said.

As a territory, Puerto Rico isn't able to restructure the debt of its public corporations through bankruptcy, a path available to municipalities in U.S. states. Federal courts have overturned a local law designed to create a similar path to bankruptcy.

The territory's governor said last month that Puerto Rico's debts, which with various municipal authorities total more than $72 billion, cannot be repaid. Officials are currently in talks with creditors over potential restructuring.

Legislation has been introduced in Congress to grant access to chapter 9 for Puerto Rico's public authorities. But it hasn't moved anywhere amid opposition from hedge funds and other bondholders that could face losses. They say the change would unfairly rewrite contracts.

Mr. Lew said the alternative to a bankruptcy-code change would be much worse. "An untested and potentially disruptive process with numerous creditor lawsuits and years of litigation would depress the local economy, increase costs and make long-term recovery harder to achieve," he wrote.

Granting Puerto Rico access to restructure its debts under the watch of a bankruptcy judge "involves no federal financial assistance and is in no way a federal bailout," Mr. Lew said.

Mr. Lew didn't outline any new steps that the administration was taking. Over the past year, Treasury officials have focused their efforts on ensuring Puerto Rico gains access to available federal programs.

The Treasury Department said separately that Mr. Lew met Tuesday with Puerto Rico's governor, Alejandro Garcia Padilla, to receive an update on its financial situation. Mr. Lew "said he would continue to work with Congress to build bipartisan support for a legal framework that helps Puerto Rico resolve its financial challenges," a Treasury spokesman said.

Puerto Rico has run up sizable debts in recent years, aided by the power to issue bonds that aren't subject to federal, state and local taxes. Its tax base has eroded as residents, who are American citizens, have migrated to the U.S. mainland in search of jobs.

The island's economy faces deep structural problems, including a much lower rate of labor-force participation than in the U.S. and a poor business climate marred by high transportation and electricity costs. Mr. Lew said any effort to boost the island's economy needed to begin with a long-term, comprehensive fiscal plan that address those challenges

Write to Nick Timiraos at nick.timiraos@wsj.com

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