Senate Looks To Change The Banruptcy Law Again!?

The US Senate is looking at the fact that in the 2005 rewrite of the nations bankruptcy laws that was designed to help protect credit card companies may have in fact injured the housing / mortgage credit market. The Senate Finance sub committee is looking to allow home owners more wiggle room when it comes to filing for Chapter 13 Bankruptcy protection. Here is my blog from last summer on this very issue;

I continue to see a lot of BLOG posts about the sub prime market, ARM's and greed being the cause of some of the housing woes and I agree with some parts and disagree with a larger portion of those claims. The advent of the bankruptcy law change 2 years ago has forced the homeowner to make a completely different set of decisions once they hit financial hardship. Gone are the days of having their credit card debt and medical bills wiped clean and continue to live in their house without recourse. Today when a homeowner faces the tough decisions on bankruptcy and foreclosure the options are completely different. Under the new rules a homeowner just can't wipe their slate clean and keep the spoils of their creditor's losses. If the house is to remain then so shall some or all of the other debts & now we have a whole different set of circumstances. Even with reduced balances and no accrued interest on the debts the repayment plan has to fit the budget of the homeowner and there in lies the problem. The homeowner is now seeing that through the conference with a bankruptcy attorney that the cause of the financial downfall; layoffs, job loss, divorce, illness, injury or death in most cases can not be overcome in a manner as to relieve the problems in the foreseeable future taking bankruptcy protection off of the table.

Now many of you are saying then why do you not agree that the current sub prime and ARM issues are the cause and my answer is that this issue has always existed but now the proverbial EXIT RAMP (bankruptcy) has been closed and we have a new phenomenon moving into the forefront of our business, Short Sales. Short selling s not new, neither is loan modification or forbearance but it is something that agents are more exposed to in light of these legal changes in the bankruptcy code. The fact that people buy too much house, do not live within their budgets, make poor financial decision and place their future in harms way is not new, the problems with ARM's has been known for years, the fact that people who do not pay their bills on time has never changed when they become home owners instead of renters and people have always tried to keep up with the Jones'. When you examine the numbers of personal bankruptcies over the past 10 years there is no surprise here those numbers are numbing and now the numbers are down due to the legal change but the effects of bad financial decisions has shifted not dropped