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According to multiple sources, including the American Bankruptcy Institute and the National Association of Consumer Bankruptcy Lawyers, efforts to amend the bankruptcy code to allow bankruptcy judges to modify home mortgage including reducing the outstanding debt to the current market value and modifying the interest rates to current rates is moving forward. It is not clear what the final legislation will look like inasmuch as there are multiple versions of the amendment being offered and there is bound to be last minute changes to the legislation as well as changes made to resolve differences between any bill passed by the Senate and the Congress. WHAT'S IMPORTANT IS SOME TYPE OF RELIEF IS ON THE WAY.
One of the things that is lost in the confusion over the various provisions of the stimulus package is that the amendment to the bankruptcy code will cost the American Taxpayer nothing. Absolutely no funds are needed for this amendment to be implemented.
It has been said that if you tell a ‘story' often enough over a long enough period of time, sooner or later people will become to believe the ‘story' to be the truth regardless of how outrageous it is. This is exactly what has happened concerning the proposed changes to the bankruptcy code; to allow bankruptcy judges to deal with home mortgages by restructuring the loans and by reducing the debt to fair market value of the property.
The most important fact is that the proposed changes are nothing new, but rather putting the law back to what it originally was. Special interest groups made up of mortgage companies and banks lobbied Congress to change the law; preventing bankruptcy judges from dealing with home mortgages in any manner other than to cure an existing arrearage at the time a chapter 13 case is filed.
The second most important fact is that bankruptcy judges have for many years and continues to deal today with all types of real property and mortgages by restructuring the debt; including changing the interest rate and terms of the loan by "cram down". A cram down reduces the debt of the property to fair market value, thereby securing the debt.
The next fact is there is a large body of law that has accumulated over the years instructing bankruptcy judges on how restructuring and/or cram down should be handled. The Supreme Court of the United States has multiple opinions dealing with this issue. The result: bankruptcy judges have vast experience, and a comprehensive set of rules, in dealing with restructuring mortgage debt.
The wailing, moaning, cry of foul plan, including the statement that changing the law would dramatically hurt the mortgage business is bull. The mortgage business has not been hurt in other areas of lending such as: office buildings; apartment houses; second homes and it did not hurt the mortgage business on home loans before congress changed the law under the last administration.
The truth is, the change in the law probably contributed to the present crisis by allowing banks and mortgage companies to make loans they should never have made in the first place. The banks and mortgage companies knew they would not have to answer the hard questions from a bankruptcy judge; the result of which might well be a change in the loan. Simply put, the changes that have occurred put the fox in the hen house and all that is being asked of Congress is to chase the fox out of the hen house. If congress passes the appropriate changes the effect will be to make mortgage companies and banks accountable for their actions and subject to the same laws that all others are subject to. Congress is not being asked to make special provisions for homeowners but rather being asked to give homeowners the same laws that all others have access to.
Gay couples, especially those that are in a long term relationship, present a unique set of problems when it comes to seeking relief under Chapter 13 of the Bankruptcy Code. Gay couples in a long term relationship usually hold the majority of their assets jointly as well as the debts they have accumulated. This situation is similar to most "married couples". Gay couples in Massachusetts, the only state that allows gay marriages and/or resides in a state that recognizes gay marriages, the problem described below does not apply.
By law, it is questionable whether a civil union between same sex couples would apply in the same fashion as a conventional marriage that is authorized in Massachusetts. Most married couples seeking relief under the bankruptcy code, file what is called a ‘joint case'. A joint case is started by the filing of a single petition by an individual and such individual's spouse. It is important to note that the bankruptcy code does not refer to a man and a woman but rather an individual and the individual's spouse.
There is a solution that gives a gay couple roughly the same relief as that of a married couple. That relief is provided for in the Rule of Bankruptcy Procedure. Partners may seek to have their cases jointly administered, which has, for the most part, the same effect as filing a joint case. This has been accomplished by each person filing a separate petition requesting relief under Chapter 13 of the Bankruptcy Code. Upon the filing of such petitions, or shortly thereafter, a Motion is filed with the Bankruptcy Court requesting the two cases be jointly administered, i.e. joined together under a single case number and for the most part handled as one case.
The foregoing has been ruled upon successfully by at least one bankruptcy judge.
There remains one unresolved issue that will likely be addressed by a bankruptcy judge soon as to the issue of ‘substantive consolidation (SP)' these cases, which would give all the benefits of filing a joint case.
A consumer being harassed by ‘Debt Collectors' has significant rights under federal law: including the right to demand that a Creditor stop communicating with you. Under the "Debt Collection Practices Act", a federal statute, there are two (2) ways to stop those harassing phone calls or for that matter any form of communication to you.
1- To inform the Creditor that you are being represented by an attorney and providing the Creditor with the name, address and telephone number of the attorney you have hired. The applicable provision can be found in Section 1692c(a)(2) of the Statute.
- 2- Write a letter to the Creditor informing the Creditor that you are not going to pay the debt and that you wish all forms of communication to stop. The applicable provision can be found in Section 1692c(c).
Life is uncertain that's for sure. You watch the news and we're told these are scary times and that our ‘banking institutions' have made mistakes and need help - billions of dollars of help. Where is the money coming from - looks like it may come from you and me.
So, perhaps it's time to reconsider the stigma of filing for bankruptcy. Let's face it - if you are not able to keep up with your expenses - why not take advantage of the laws that allow for ‘debt forgiveness'. Bankruptcy does not give you permission to be irresponsible - bankruptcy gives you the ability to manage your finances (Chapter 13) or wipe out your unsecured debts (Chapter 7).
No one likes to admit they made mistakes or even acted a bit irresponsible. But no one likes arguing with their spouse over money and the tension that fear and unmanageable debt adds to a marriage can feel like the last straw. Our debts don't define us. Our ‘toys' and our ‘careers' don't define us. When you look in the mirror and review your personal character inventory - how do you rate? Are you someone that is caring, loving, generous of spirit, honest, forthright, etc.? I believe that's what defines us.The bottom line is - if you've made mistakes with finances - forgive yourself; if you have medical bills, lost your job, your divorce set you back, your mortgage payments are currently unaffordable - help yourself and your family by seeking ‘debt forgiveness'. At least that's honest. Now, can we say that about many of our financial institutions that have either failed or on the verge of failure? Just something to thing about............
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