A major amendment to the U.S. Bankruptcy Code that Congress appears on the verge of passing will help limit foreclosures and keep more who file for Chapter 13 bankruptcy from losing their homes. The Helping Families Save Their Homes and Bankruptcy Act of 2009 would reverse portions of the sweeping Bankruptcy Abuse Prevention and Consumer Protection Act — passed in 2005 with the enthusiastic support of creditors — that made it harder for consumers to get out from under debt. One way it did that was by removing the power of bankruptcy judges to adjust downward the terms of Chapter 13 filers’ first or second mortgage for their principal residence in order that they might hang onto their homes. The Helping Families bill would restore bankruptcy judges’ power to adjust mortgages — as is currently allowable with financial obligations such as car notes. Derren S. Johnson, a longtime bankruptcy attorney, says bankruptcy lawyers have been trying for years to pass a bill like Helping Families, though earlier attempts have been shot down. “I see it as certainly a better alternative than a bunch of houses being empty,” she says.
If the Helping Families bill is attached to the Democrats’ $825 billion stimulus bill, it could pass within a week, Johnson says. If it has to go through on its own, it could take three to four weeks — though it does appear headed for passage, now that the country’s foreclosure rate has reached crisis proportions and consumers are screaming for help. “Everybody who’s working on the legislation right now is saying it’s going to pass,” Johnson says.
While Baton Rouge has the lowest foreclosure rate of any city in the country, foreclosures are happening here and the Helping Families bill will help local consumers, she says. “There’s a lot of it out there, and I see more of it coming this way,” she says. “My fear is I see what’s happening other places and it’s headed this way.”—Steve Clark