Will the Bankruptcy Laws Change Again?

Today's New York Times has a number of articles on the problems in the credit markets.  Among them is a lengthy piece titled "Loan by Loan, the Making of a Credit Squeeze," focused on the problems of consumers.  In that context, the article discusses attempts to ease the bankruptcy laws. An excerpt:

“The bankruptcy law was written for a different world, and we want to give the bankruptcy courts, and creditors, more flexible tools to work with borrowers to save their homes,” said Senator Richard J. Durbin of Illinois.

In September, Mr. Durbin, the Democratic whip, plans to propose amendments to the bankruptcy code, in a bill called the Helping Families Avoid Foreclosure Act. It would, among other things, permit writing down loans and stretching out payment terms.

Some bankruptcy experts agree that it is time to change the law. “Our bankruptcy laws are not well designed to deal with a massive wave of mortgage foreclosures,” said Elizabeth Warren, a professor at the Harvard Law School. In particular, Ms. Warren said, bankruptcy courts should be able to rewrite mortgages in line with market conditions.

The banking industry, which pushed hard for the tougher bankruptcy law in 2005, wants no easing up now.

Comments

[Account Deleted]

Thanks for the nice article. As the economical conditions are not good worldwide these days, Bankruptcy rate is going high these days. I have gone through many sites and blogs about bankruptcy law, as http://www.jrlaw.org/ check it once it will help you for sure.

[Chris]

The lenders will not enjoy by foreclosing our property but they will enjoy with the monthly statements which we pay to them including the interest.

[Mike Smith]

Great site

Mike
http://www.your-bankruptcy-information.com

[Mike Smith]

Great site

Mike
http://www.your-bankruptcy-information.com

[Jim]

The legislation is good and will help people who face these poor loans. It will make them have to endure a three to five year period of a repayment plan, but it will make it possible for them to actually find some relief in chapter 13 reorganization.
I believe this legislation will be held up in committee and may become a platform for the next Presidential and legislative election campaigns. Hopefully I am wrong and the legislation passes both houses of Congress and is signed into law by the President.
I am seeing firsthand the problems the exception for primary residential secured loans has to make saving a home difficult and near impossible to complete in at least my situation. I am sure that I am not in this predicament.

[Bob]

Someone hasn't got a clue about the costs of foreclosure, not only to the borrower, but to the lender, and the surrounding community. Foreclosing on houses DOES NOT help with cash flows to investors. Keeping people in their homes, making payments based on reasonable lending rates does more for the investors than anything. If anyone should be foreclosed on, it is the people that have been working in this industry. I'd say putting them out on the street is more fair than the other way around.

[Joe]

Yikes!For some reason I am confused. We are trying to legislate compassion? We are talking cash flow. Investors own the mortgage. Investors depend on the cash flow. Investors are people with IRAs and 401k's. If a mortgagor can't make payment, foreclosure helps with the cash flow to the investor. Why should the investor get stuck holding the bag? Maybe the government could pay for the mortgagor. Maybe the government could collect similar to the way they collect for delinquent student loan payments. The government is able to collect better than the individual 401k and IRA investor.