Bankruptcy Attorney Blog Archives

Congress is considering the Bush administration’s $700 billion proposal to bail out the credit markets and Wall Street firms in the wake of the continuing financial meltdown. Today, Democratic members let it be know that allowing bankruptcy judges to write down the amount owed on a mortgage should be part of any recovery package.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke have urged Congress to move quickly to adopt what would be the most sweeping financial rescue plan since the Great Depression. It will provide the Treasury Secretary with unprecedented authority to act to stabilize the credit markets by purchasing “illiquid assets” from troubled financial firms.

The program would be open to both U.S. and foreign banks that hold the securities, most of which are bundled mortgages that have lost value in the sub-prime meltdown.

Democrats in Congress want to change the law and allow bankruptcy judges to re-write mortgage loans for persons in bankruptcy so that the homeowner can avoid foreclosure.

The Bush administration claims that allowing the mortgages to be revalued in bankruptcy will make it more expensive for everyone to get a home loan if banks had to consider the possibility that the amount of the mortgage could be reduced by a bankruptcy filing.

Some say the administration is ready to lie down on the tracks and derail the legislation to prevent the change in bankruptcy law. Getting help for homeowners at risk of losing their homes may fall to keeping the protection against bankruptcy judges changing the terms of mortgage loans. Before the Bankruptcy Abuse Protection and Consumer Protection Act of 2005 went into effect, bankruptcy judges had been allowed to make the changes at their discretion.

Without the change, homeowners who have been hit hard by the economic downturn and the mortgage meltdown may end up stuck with mortgages for more than their home is worth.

Congress and the administration also remain at odds over the demands of some lawmakers to including limits on the pay of top executives.

Congressional leaders and Treasury officials also said they were close to an agreement Tuesday afternoon, September 23, over a proposal by some Democrats in which taxpayers could receive an ownership stake, in the form of warrants to buy stock, from firms seeking to sell distressed debt.

Lawmakers want to require an equity stake that will allow taxpayers to benefit from any profit that comes from the bailout. The administration says that it wants flexibility on the matter.

Has the mortgage meltdown affected you? Are you treading water in a stormy sea of debt? Are you in danger of losing your home to foreclosure? Have you considered consulting a bankruptcy attorney?

Everyday we hear more and more about the continuing financial crisis due to sub-prime mortages and a bursting housing bubble. The fallout from the problem is affecting both main street and Wall Street as investment banks and insurance companies loom on the edge of failure. Home foreclosures are still rising and have reached record numbers in California and Nevada. 

Investment bank Lehman Brothers filed for bankruptcy protection recently, showing that the federal government does have a limit in its current strategy of nationalizing financial services companies that it deems too big to fail, but the government has covered some big losses at Wall Street firms. It arranged financing for the purchase of Bear Stearns by JP Morgan in March. It seized control of mortgage giants Fannie Mae and Freddie Mac. It paid $85 millinon for a major stake in insurance giant AIG to keep the firm afloat.

Will the government help you pay your mortgage? Is there help to save your home from foreclosure? Federal bankruptcy law provides protections for homeowners who are in danger of losing their homes. Filing Chapter 13 bankruptcy can stop foreclosure proceedings and allow you to catch up on back payments. It will restructure your debt so that you can afford to stay in your home.

Anyone can fall into a financial crisis, even big Wall Street firms that are suppose to know how to make lots of money. Bankruptcy law provides a way for people and corporations to restructure their debts in a way that keeps them from being further victimized by the current financial storm. A good bankruptcy lawyer can show you the path to smooth sailing, with less debt.