Cramdown Bill Fails in the Senate
I previously wrote here about a proposed bill that would have allowed bankruptcy judges to modify mortgages in a Chapter 13 bankruptcy.
Yesterday, in light of strong opposition from the banking industry lobby, the bill failed to muster enough votes to make it through the Senate. President Obama pledged to sign the bill into law upon passage, but that possibility now seems slim. Contrary to popular belief, bankruptcy judges can already modify the principal on home loans in a Chapter 13. They cannot, however, do such a cramdown when the home loan is on a debtor’s principal residence. The failed bill would have removed this limitation.
Anyone waiting on this bill to pass before filing a Chapter 13 should evaluate their current situation in light of the bill’s defeat.
L.A. Times coverage of the Senate meltdown is available here.