Bankruptcy courts may get new powers over mortgage loans

The house has been working on a bill which would give bankruptcy courts the right to rearrange the terms of certain mortgage loans in favor of the borrower. As it works now when you file bankruptcy, the court will usually wipe out unsecured debt (like credit card debt) or let you pay it off at 10 to 15 cents on the dollar. Also, the court can take all your missed mortgage payments and package them up as an interest free debt that you pay over time, usually using the money you had been sending to the credit card companies. But the courts have been unabel to change the terms of your loan going forward.

Now a bill being worked on in the House, which has bipartisan support, would allow bankruptcy judges to alter the terms of certain mortgages going foward, reducing the payments to manageable levels and thus saving your house. Only subprime and non-traditional mortgages that were written between 2000 and 2007 would qualify, but there are millions on mortgages in that category, so this law could be quite useful to large numbers of mortgage holders.

It is given a reasonable chance of passage.

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