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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