Rewrite of Bankruptcy Law Dies in Senate
By: Phyllis Pavese
As the threat of recession looms, the fiery debate goes on over how the federal government can best address the needs of homeowners facing foreclosure and declining home prices. However, Illinois Senator Dick Durbin's solution - a bankruptcy bill that would allow judges to modify mortgage interest rates for homeowners facing foreclosure - is no longer part of the debate.
By a recent vote of 58-36, the Senate rejected the measure, aided by Republicans and the banking lobbyists, who claimed interest rates would increase, even though the amendment was aimed only at mortgages currently in place.
In a statement after the vote, Durbin said, "If the federal government is going to ride to the rescue of investment banks on Wall Street [referring to the government bailout of Bear Stearns], it should also provide some relief to those who are about to lose their homes on Main Street. Our goal ought to be preventing foreclosures not just propping up home builders and big lenders." He openly blamed the banking lobby for the defeat, although his measure was approved in a separate action by the Senate Judiciary Committee and could resurface.
While the amendment was defeated, the compromise Senate bill would give tax breaks to home builders and other related businesses via a change in accounting rules for 2008 and 2009, at a cost of $15 to $20 billion.
Some Help for Homeowners Remains
The broader housing bill includes a range of solutions. For example, a tax credit of $7,000 over two years would be given to buyers of homes in or near foreclosure. In addition, $100 million would fund debt counseling "plain-English" mortgage paperwork. It would also allow an additional $10 billion in tax-free revenue bonds to be issued to assist borrowers in refinancing their mortgages. Communities would get $4 billion in grants to purchase and repair foreclosed homes.
A standard deduction of $1,000 would also be allowed for joint filers ($500 for individuals) for all U.S. homeowners who pay property taxes, expanding the deduction to those who do not itemize currently.
In addition, the size of mortgages insured by the Federal Housing Administration (FHA) would be raised, allowing borrowers up to $550,000 with a 3-1/2% down payment.
Filing Bankruptcy Still an Option
When facing foreclosure, many people do not know that filing bankruptcy may be able to help them keep their home. Those who are behind on mortgage payments and also have too many other bills may find filing Chapter 13 bankruptcy is a possible option, while those with significant equity and who are not more than 90 days past due may have other options. Take the time to talk with a Total Bankruptcy sponsoring attorney! Our number is 1 (877) 349-1309, and you may also use our secure online case evaluation form to be connected with a local bankruptcy attorney as soon as possible.