Consumer Bankruptcy Filings Rising in Southern California

June 29, 2009 · Posted by Alex

From Curtis Law Group’s blog:

“As reported in the Los Angeles Times yesterday, southern California has seen a dramatic increase in the number of consumer bankruptcy filings of late. The article referenced the mortgage crisis as the culprit, while also highlighting the fact that changes to the Bankruptcy Code in the Bankruptcy Bill of 2005 have seemingly failed to reduce the number of bankruptcies these last few years.

Although the article emphasizes the increase in the greater Los Angeles area, bankruptcies in Orange County, Riverside County, and San Bernardino County have also risen dramatically in the past year, flooding bankruptcy attorneys in southern California with inquiries from debtors about whether they qualify for Chapter 7 bankruptcy, or whether they must resort to Chapter 13 of the Bankruptcy Code for relief.”

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Bankruptcy Bill DEFEATED 51-45 in Senate

May 4, 2009 · Posted by Alex

The so called bankruptcy “cramdown” bill that the Obama administration hoped would be a key part of its foreclosure prevention plan was defeated in the Senate on Thursday. Bankruptcy attorneys in Orange County and around the country had hoped that this bill would pass and provide relief for their bankruptcy clients, especially those underwater on their homes.

From CNN Money online:

“The Obama administration lost a bid to add a powerful weapon in its fight against foreclosure Thursday, after the Senate voted down a proposal to allow bankruptcy judges to modify mortgages.

The defeat left many housing advocates questioning the effectiveness of the president’s loan modification plan. The so-called cramdown provision, which would allow judges to reduce mortgage principal, would have put pressure on servicers to modify loans before borrowers file for bankruptcy.

The financial industry lobbied hard against the bill, arguing that letting judges change mortgage contracts would add instability to the market and raise interest rates. Senate Republicans and some moderate Democrats were concerned about the bill’s impact and about the growing resentment among homeowners in good standing.

The bill was defeated by a 51-45 vote. The House had passed similar legislation last month.”

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Republicans Holding Up Bankruptcy Bill in Senate

March 30, 2009 · Posted by Alex

From the Legal News section of Curtis Law Group’s website:

“Congressional Democrats in the Senate are trying to pass a bankruptcy bill, coined as a “cramdown” bill by opponents of the legislation, which aims to help stem the tide of foreclosures by giving bankruptcy judges the discretion to modify mortgages for homeowners who otherwise cannot afford their homes.

The House of Representatives have already passed a version of this bill, but Republicans are holding it up in the Senate. The Senate has decided to put off the vote until later in April, while changes to the bill are negotiated.”

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Bankruptcy Bill Passes in House of Representatives

March 6, 2009 · Posted by admin

Attention, bankruptcy attorneys in Orange County — the number of rising bankruptcies in the near future may not be due to the economy alone.  Consumer bankruptcies, especially Chapter 13 bankruptcies, may increase do to the new Bankruptcy Bill that has just passed in the House.  How the Senate may change the bill remains to be seen, but now we know how the House wants it to look.

From the AP:

“A plan to give debt-strapped American homeowners a chance to lower their mortgage payments through bankruptcy courts won House of Representatives approval Thursday as a report revealed that foreclosures and past-due home loans hit a record 5.4 million last year.

A survey by the Mortgage Bankers Association released Thursday found that nearly 12 percent of U.S. homeowners were in foreclosure or behind on their payments at the end of 2008.

The legislation, part of President Barack Obama’s housing rescue plan, is facing a much tougher road in the Senate amid the same industry opposition and reservations from moderate Democrats that nearly derailed it in the House.

The House passed the bill 234-191 mostly along party lines, and the Senate could consider it within weeks.

The legislation would give bankruptcy judges — who now can modify loans for such items as cars and student loans but not for primary residences — new power to reduce the interest rate and principle on a home mortgage.

Supporters regard the threat of a mortgage modification in bankruptcy as a crucial tool to prod banks to negotiate with homeowners for more affordable terms. Critics argue the measure will create a flood of bankruptcy filings that ultimately will drive up mortgage rates and further destabilize the battered housing market.

The House bill is the product of a compromise between dueling Democratic factions. A group of moderates broke with liberal backers last week and refused to support the measure unless it included several changes the banking lobby had sought.

It took days of intense bargaining with an assist from Obama’s team to get the measure back on track. The president dispatched his housing secretary, Shaun Donovan, to a closed-door meeting in the Capitol to explain to restive Democrats how the measure fits in with the $75 billion housing initiative Obama unveiled this week.

The resulting compromise would bar homeowners from getting loan modifications in bankruptcy court unless they have first tried to work out a deal with their lenders and have no other way of affording their mortgages.

It also would let judges consider whether the home loan company had made a reasonable offer to change the terms to those embodied in Obama’s housing plan — allowing the homeowner to reduce his monthly payments to about one-third of his income.”

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Bankruptcy Bill Update: Possible Restrictions on Cramdown Measure

March 3, 2009 · Posted by Alex

The Orange County Bankruptcies Blog is paying special attention to the developments with the bankruptcy legislation presently being debated in Congress, as the outcome of these debates will impact Orange County bankruptcy attorneys and Orange County residents seeking the help of a bankruptcy attorney to a great degree.

From the Wall Street Journal online:

“House Democrats are discussing a new restrictions to a controversial measure that would allow strapped borrowers to have their mortgage debts reduced in bankruptcy, people familiar with the matter said.

After pushing a set of changes last week, lawmakers are discussing whether to tighten language in the legislation to clarify that Chapter 13 bankruptcy is a last resort only after efforts at voluntary mortgage modifications fail.

The negotiations are designed to win the approval of centrist Democrats uncomfortable with the concept. They have exposed a rift between liberal Democrats and the more business-friendly wing of their party.

The measure is a central plank of the Obama administration’s strategy to right the housing market. Proponents say it will act like a cudgel that will encourage mortgage companies to voluntarily take advantage of government-backed financial incentives to modify loans.

Under the legislation, bankruptcy judges would be able to reduce the principal amount of mortgage loans for struggling borrowers — a process dubbed “cramdown.”

The banking industry warns such a move will raise borrowing costs for all homeowners and clog the bankruptcy courts, prompting judges to write off tons of other consumer debt just when lenders are reeling from the financial crisis.

The legislation’s fate remains up in the air after Democratic leaders last week postponed a vote on the measure until Tuesday after support softened among some of the rank-and-file. That vote is now likely to happen no earlier than Wednesday due to a snowstorm that disrupted the House schedule.”

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