Details of the Great Bailout are still being mulled over by economists, pundits and members of Congress. Another group taking notice: bankruptcy judges. Congressional Democrats hope to include legislation that would allow judges to modify mortgages for people in bankruptcy proceedings. See the story from the WSJ”s Amir Efrati as well as the National Law Journal”s Marcia Coyle. Current bankruptcy law allows judges to approve the modifications of the terms of certain debts, namely auto and student loans and second-home mortgages. Under the Democrats” proposal, judges could approve individuals” reorganization plans that would allow debtors to pay a lower interest rate for their primary-residence mortgages. Furthermore, if the value of the property falls below the loan amount, debtors potentially could reduce the balance of the loan to equal the current value of the property — a process commonly known as a “cram down” or “strip down.” [Read the rest of the story]
The below is a post from the WSJ Law Blog
Will Bankruptcy Judges Get Power to Strip Down?
By Ashby Jones