New Ban on Modifying Residential Home Mortgages in Chapter 13 Bankruptcy
Representative Linda Sánchez introduced House Bill 3707 that would eliminate a ban on modifying residential home mortgages in Chapter 13 bankruptcy
. Currently, the law for Chapter 13 bankruptcy allows modification of nearly any type of loan with the exception of a residential home mortgage. Under the proposed bill, homeowners may be allowed, with the supervision of the bankruptcy court and bankruptcy trustee, to modify their home mortgage in Chapter 13 bankruptcy.
The debtor would be required to repay through Chapter 13 bankruptcy, the actual value of the home and interest rates deemed "predatory" could be modified to reflect true market value. Under the proposed changes to the bankruptcy law, the lenders would have the right to add extra interest as a cushion to protect them from possible future default.
This is the type of bankruptcy reform that is needed by struggling Americans. With the subprime fiasco, foreclosure crisis and the credit crunch, debtors need as many viable options as possible so that they can eliminate debt quickly and get back on their feet. Hopefully, our legislators will have enough foresight to give this bankruptcy reform law serious consideration.