The U.S. Treasury Department is warning of a potential government shutdown in Puerto Rico and lengthy litigation if Congress doesn't approve a bankruptcy mechanism for the U.S. territory soon.

The counselor to the U.S. Treasury secretary issued the warning on Thursday as House Republicans hold hearings in Washington during a final push to address the island's failing economy.

Antonio Weiss said he envisions a debt-restructuring plan that would temporarily suspend litigation to prevent a shutdown of basic government services on the U.S. territory and give time for voluntary negotiations with debt holders. He said it also would create a voting mechanism to prevent a handful of officials from blocking a reasonable compromise.

Weiss also said that an independent federal oversight board is needed if a bankruptcy mechanism is approved.