Saving Family Homes in the Bankruptcy Bill
Homeowners' Rights and Mortgage Stripping under the Bankruptcy Bill
This bill was established to correct the provision in the Bankruptcy Code, from 1984, prohibiting families from modifying mortgages on a principle residence. President Obama made reference to the fact that John McCain had 7 houses, allowing him to strip a mortgage from 6, when other Americans with only 1 home could not strip a mortgage on theirs.
Saving Family Homes in the bankruptcy bill is intended to bring the average person into the same position that wealthy persons have been in since the 1984 provision. The bill was initially passed in the House, but got stuck in the Senate, where it was voted down 45 to 51, because many Democrats said that it would raise interest rates on house.
Protect your security and your rights. Contact attorney Richard Croak today by calling 518-213-3359 or contact the office by e-mail.
Arguments Against the "Saving Family Homes" Bill
The bill was criticized for potentially raising interests rates, it was also denounced for violating contract law because it would make contracts null and void. However, this is exactly what bankruptcy is intended to do. Chrysler and other corporations are able to nullify contracts through other provisions in the Bankruptcy Code, so why are average citizens excluded?
This bill would have brought average citizens into the same situation as Chrysler or any major debtor coming out of bankruptcy court by allowing them to restructure debt in the same manner as the wealthy and other corporations. Under Chapter 12, farmers are also able to restructure their mortgage. Allowing homeowners this option would put average citizens in the same position as farmers.
Consequences of Voting Down the "Saving Family Homes" Bill
Since Congress voted this bill down, the consequences are still unforeseen. Because there is no recourse for many homeowners, home prices continue to decline and home building associations cannot restructure their loans. This bill has the potential to stop falling home prices so that creditors can restructure instead of losing a mortgage through bankruptcy.
At some point the bill will come back. When house prices get lower and lower and lower, there will be impetus to bring the bill back to stop the free fall of home prices. Recently, a bank in Texas started tearing down houses in California because they decided that leaving them stand would be more expensive. Because the market has changed, it is time for Congress to reevaluate the position of the homeowners and their rights to restructure a mortgage to prevent bankruptcy.
For more information about bankruptcy options and your rights, please contact lawyer Richard Croak at his Albany, New York, office for an initial consultation by calling 518-213-3359.
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