A proposed debt exchange, where creditors would replace their current debt with new bonds with terms more favorable to Puerto Rico, signals a significant shift for Mr. García Padilla, a member of the Popular Democratic Party, who was elected in 2012. His party is aligned with the Democrats on the mainland and favors maintaining the island's legal status as a commonwealth.
He said that when he took office, he tried to balance the fiscal situation through austerity measures and fresh borrowing. But he saw that the island was caught in a vicious circle where it borrowed to balance the budget, raised the debt and had an even bigger budget deficit the next year.
Residents began leaving for the mainland in droves, and Puerto Rico's credit was downgraded to junk, making borrowing extremely expensive.
Only a few months ago, the administration was considering borrowing as much as an additional $2.9 billion, which would be paid for by a fuel tax.
But recently, Mr. García Padilla's team has been laying the groundwork for more drastic action. The governor commissioned a study of the financial situation by former officials at the International Monetary Fund and the World Bank. Concluding that the debt load is unsustainable, the report suggests a bond exchange, with the new bonds carrying "a longer/lower debt service profile," according to a confidential copy reviewed by The New York Times. The García Padilla administration plans to make the report public on Monday.
"There is no U.S. precedent for anything of this scale or scope," according to the report, one of whose writers was Anne O. Krueger, a former chief economist at the World Bank and currently a research professor at the School of Advanced International Studies at Johns Hopkins University.
The "Krueger Report," as it is being called, also seems aimed at the Obama administration and Congress, both of which have taken a largely hands-off approach to Puerto Rico's fiscal problems. United States Treasury officials, however, have been advising the island's government in recent months amid the worsening fiscal situation.
In June, Puerto Rico hired Steven W. Rhodes, the retired federal judge who oversaw Detroit's bankruptcy case, as an adviser. The government is also consulting with a group of bankers from Citigroup who advised Detroit on a $1.5 billion debt exchange with certain creditors.
In Washington, the García Padilla administration has been pushing for a bill that would allow the island's public corporations, like its electrical power authority and water agency, to declare bankruptcy. Of Puerto Rico's $72 billion in bonds, roughly $25 billion were issued by the public corporations.
Some officials and advisers say Congress needs to go further and permit Puerto Rico's central government to file for bankruptcy — or risk chaos.
"There are way too many creditors and way too many kinds of debt," Mr. Rhodes said in an interview. "They need Chapter 9 for the whole commonwealth."
Hedge funds holding billions of dollars of the island's bonds at steep discounts are frustrated that the government has not seemed willing to reach a deal to borrow more money from them.
"We want to be a part of the solution to the commonwealth's fiscal challenges," a group of investment firms, including Centerbridge Partners and Monarch Alternative Capital, wrote in a letter last week.
An aide to the governor said the hedge funds' debt proposal was too onerous. And the deal would only postpone Puerto Rico's inevitable reckoning.
"It will kick the can," Mr. García Padilla said. "I am not kicking the can."