Monday, December 14, 2009

Mortgage Bankruptcy Amendment Defeated

On Friday, the House of Representatives rejected an amendment to the "Wall Street Reform and Consumer Protection Act of 2009" that would have added provisions to allow bankruptcy judges to modify home mortgages in chapter 13. The amendment was similar to that previously passed by the House on March 5, 2009 in H.R. 1106, the "Helping Families Save Their Homes Act of 2009" but was rejected by the Senate.

Under present law, mortgages that are secured only by a principal residence may not be modified, but mortgages on investment property may be modified.

It should be noted that some homeowners may be able to obtain a mortgage modification under present chapter 13 or chapter 11 bankruptcy law by changing the use of their home from being their principal residence to investment property. A modification in chapter 13 or chapter 11 bankruptcy may involve a reduction in principal balance and changes in interest rate, monthly payment and term.
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