Bankruptcy Fix: Another Effort to Defeat Foreclosure

by on Bankruptcy

Senators came up with another foreclosure relief in the form of a bankruptcy fix. It hopes to help the bankrupt modify their delinquent loans under court protection. But there seems to be a dispute whether it should be put into a bill with the fear of Republicans delaying or even rejecting the plan.

Even with President Obama’s compromises, not even one Republican agreed with the proposed economic stimulation and recovery plans. The bill is thought to be delayed until spring or until it could be attached to other legislation. It is just sad to see politics as a hindrance to a good economic and foreclosure relief.

The bankruptcy fix could have been a good foundation to start rebuilding the weakened economy. Bad loans triggered the beginning of the crisis, followed by delinquencies then repossessions as the housing industry dwindle with lower home prices. Repossessed homes are now stagnant in the market, bringing home prices down. With financially unequipped homeowners, this will be a cycle- prices fall, delinquencies increase, foreclosures multiply.

Depreciating homes and rising defaults worsens the credit crisis. As long as banks lose, they become more difficult to borrowers.

Lenders are putting their own efforts to help their borrowers to modify their cases and prevent the looming foreclosure. But these efforts seem not good enough.

Bankruptcy fix could be the remedy. When a trouble homeowner would rather fix his loan through payment than to lose their home through foreclosure, a court settlement is possible. This will promote voluntary loan modifications.

It was said that the current administration is willing to shell out $100 billion for foreclosure relief but this is not enough. We need a bankruptcy reform. A bankruptcy fix will even be better for all tax payers because it will cost them nothing.

And if lender participation is desired, discretion is needed. The Obama administration must assure and clear the thought that their foreclosure battle will be lost under the wings of a judge.