WASHINGTON — The Obama administration is asking Congress to grant bankruptcy protection to Puerto Rico as the island territory struggles to restructure its $72 billion in debt.

A proposal sent to Capitol Hill Wednesday would allow Puerto Rico and other territories to to seek a financial restructuring under the supervision of a federal bankruptcy court — a step currently not available to states or territories. The administration is also asking for new oversight of Puerto Rico’s finances, revamp the territory’s Medicaid funding system and extend the earned income tax credit to Puerto Rican taxpayers.

Puerto Rican officials have been in talks with hedge fund managers to refinance the island’s debts, but those talks appear to have broken down. The Treasury Department has discussed the possibility of some kind of federal role in helping Puerto Rico but has emphasized that a bailout is not part of the plan.

«The administration has no plans to provide a bailout to Puerto Rico,» White House press secretary Josh Earnest said last week. «What we have also said is that the administration has an interest in working with officials inside of Puerto Rico to help them deal with the significant financial challenges that are facing the government there.»

The White House said Wednesday that administrative efforts won’t be enough, and that immediate congressional action is needed to address the crisis.

Puerto Rico’s financial struggles have been years in the making, as the island took advantage of a unique situation where its municipal bonds are exempt from state, local and federal taxes – a rarity in the bond market. As the island continued bleeding money, it continued issuing bonds to get by. From 2000 to 2012, the government’s public debt nearly tripled from $24 billion to $70 billion, according to the Center for a New Economy in Puerto Rico.

Gov. Alejandro García Padilla has been trying to slash expenditures and restructure Puerto Rico’s debt since he took office three years ago, but in July, he was forced to announce that his efforts were not enough and the government would begin defaulting on its massive debt.

After learning of Obama’s request to Congress on Wednesday, Padilla said he would evaluate the proposal – and its suggestion of a federal oversight board – to ensure that it «respects Puerto Rico’s autonomy» and complies with the «democratic principles underlying our relationship with the United States.» But the governor applauded the move and welcomed the prospect of a new avenue to handle his island’s economic struggles.

«My administration has made a concerted effort to work with the Obama administration and Congress over the past three years and these measures are a direct reflection of our shared commitment to the future of Puerto Rico,» he said in a statement. «I look forward to having ample discussions in Washington and Puerto Rico regarding this new proposal.»

The inability of the island to repay that debt is a big threat to American investors, many of whom don’t realize how much money they have tied up in the island’s economy. Morningstar, an investment research firm in Chicago, estimated in 2013 that 180 mutual funds in the United States and elsewhere have at least 5% of their portfolios in Puerto Rican bonds.

Alan Gomez reported from Miami.