Bankruptcy

Top Legislative Agenda in 2009: Mortgage Relief Through Bankruptcy

By Richard K. Gustafson

Two U.S. lawmakers said Monday that they will start the new legislative session in January by renewing an effort to give homeowners a chance to rework residential mortgages in bankruptcy.  Senator Dick Durbin (D-IL) and Representative Brad Miller (D-NC) said they will introduce legislation to modify bankruptcy laws to give judges in bankruptcy the ability to rewrite mortgages based on the value of the property.

This legislation has already been rejected by the Senate earlier this year in April.  But, with both the House of Representatives and the Senate controlled by Democrats, the legislators are going to try again.  President-elect Obama supported allowing bankruptcy judges to modify residential mortgages during his campaign.

Specifically, 11 U.S.C. Section 1322(b)(2) currently provides that a chapter 13 plan may - “modify the rights of holders of secured claims, other than a claim secured only by a security interest in real property that is the debtor’s principal residence…”  It is this provision that would need to be amended to remove the exception for a secured claim secured by the debtor’s principal residence.

Full post as published by Consumer Bankruptcy Blog from Legal Helpers on December 11, 2008 (boomark / email).