More Bankruptcy Changes Proposed
By Brian Williams on Thursday, November 29th, 2007 :: 2:28 pmCategory: Financial News
Two years after a major overhaul to U.S. bankruptcy law, three senators are offering plans to help debt-ridden homeowners who are considering filing for bankruptcy.
Bankruptcy laws changed in 2005, placing more emphasis on filers’ income and their ability to pay off debts. Under Chapter 13 bankruptcy, you must repay your debts according to a schedule determined by the bankruptcy court. Through Chapter 7 bankruptcy, you can sell your property and assets to pay off debts.
More debt can be discharged under Chapter 7, but under the recent changes, bankruptcy filers are being steered toward Chapter 13 so more of the debt is paid and not discharged.
A proposed bill by Sen. Christopher Dodd, D-Conn., unveiled this month, would loosen some of the stringent requirements of bankruptcy reform in 2005 that made it harder for people to eliminate debts through the federal court process. Dodd said his bill would assist people who face unplanned economic disasters.
“Most often, individuals are forced into bankruptcy by a devastating medical event or the loss of a job,” said Dodd on his Web site.
Dodd’s proposal allows for:
- Allowing bankruptcy courts to restructure mortgages to allow families to keep their homes
- Discharges of private student loans and medical debts through bankruptcy
- Giving bankruptcy judges more discretion in determining a family’s ability to pay debts through bankruptcy.
Sen. Arlen Specter, R-Pa., has also proposed tweaking the handling of mortgages in bankruptcy proceedings. During a speech on the Senate floor in October, Specter said he wanted to help people in default on mortgage payments.
“The problem has arisen largely because of the many homeowners with adjustable rate mortgages who face increased interest rates and unexpected increases in their mortgage payments,” said Specter.
Some of Specter’s proposals include:
- Allowing bankruptcy judges to delay or stop interest rate increases on mortgages for homeowners in bankruptcy.
- Letting bankruptcy judges waive early prepayment or prepayment penalties on mortgages to make it easier for homeowners to refinance for a better mortgage for them
- Delay the mandatory credit counseling until after filing is foreclosure if home foreclosure is imminent
Another senator, Dick Durbin, a Democrat from Illinois, also is calling for people to be allowed to restructure their mortgage in bankruptcy proceedings and proposing to waive mandatory credit counseling if a home is in foreclosure.
Author bio: Brian Williams, a graduate of the University of Texas at Arlington, has 11 years’ experience writing and editing at daily newspapers. Learn more about Credit Solutions.
Related Debt Consolidation Articles
- Prevent the High Costs of Debt Consolidation and Get Debt Relief
Our service is an effective method to reduce credit card debt and save money, in fact, it is a better debt-relief method than debt consolidation. - Decide What Debt Relief Program Works Best for You
Many lenders offer loans for debt consolidation, but none compare to our service. - Consumer Preference for Debt Relief
Deciding on a debt-reduction method, such as our service or debt consolidation, depends on the consumer's preference. Credit Solutions agents work to reduce the consumer's principal amount of credit card debt, while a debt consolidation loan reduces the interest rate on the debt. - Be Debt Free Without Secured Loans
When your debt level is outpacing your disposable income level, you can find the most debt relief through a Credit Solutions program, not a secured debt consolidation loan. - Find Debt Reduction for Multiple Debts
Debt consolidation using a personal loan offers consumers an effective way to eliminate multiple small debts, while consumers who do not want to apply for a loan can enroll in our service.
