Bumped: This is more important every day that banks clamor for some type of bailout:
A bill to allow the bankruptcy court to modify home loans is pending, HR 3609.
Much has been written about plans to help all the poor people facing foreclosure (What? You haven't seen anything? You must not be reading financial blogs...). The Fed is going to try to force mortgage servicers to freeze mortgage interest rates for people facing adjustments over the next year to 18 months.
The complaints about the plan are: only those people that are current on their payments but unable to afford future raised payments will qualify. Those that can afford higher payments or those already missing or late on payments will not qualify. One report suggested only 12% of people facing payment adjustments will qualify; the information necessary to make the determination includes income and expense details for all couple of million borrowers.
There is an easier way. Let anyone missing payments, or facing higher adjusted payments, file chapter 13 bankruptcy. The Federal Court requires detailed income and expense reports, a means test to determine how much is available for debt repayment and a single modification of the law will allow the court to freeze the interest rate on the mortgage for up to 5 years.
This way only those that really need the help get it, it is federally supervised, it helps borrowers get the rest of their finances in order and it is limited to 5 years.
Talk it up....