Mortgage Bankruptcy Bill of 2007.
The mortgage bankruptcy bill, known as "Conyers Bill", was signed into legislation in December 2007. The highly controversial bill modifies the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The primary goal of Conyers Bill is to help homeowners retain ownership of their property in the event of bankruptcy.
Mortgage bankruptcy legislation applies only to homeowners who obtained their mortgage through sub-prime or non-traditional loans after January 1, 2000 and later filed for Chapter 13 bankruptcy. In order to receive protection under the mortgage bankruptcy bill, homeowners must provide proof they lack sufficient income to remain current or cure arrears on their mortgages and avoid foreclosure.
When debtors petition the bankruptcy court seeking Chapter 13 bankruptcy protection, their primary goal is usually because they want to save their home. Since Chapter 13 offers debt relief through restructuring, courts can control the terms to ensure both parties' interests are protected.
The mortgage bankruptcy bill allows courts to reduce the interest rate of mortgage notes, eliminate excess fees and alter the principal mortgage balance to reflect the current market value of the real estate.
Changing the mortgage terms offers the homeowner a fair chance at regaining control over their finances. As long as the debtor can meet the commitment of their repayment plan, mortgage lenders have the opportunity to recoup their losses and avoid initiating foreclosure proceedings.
Should the debtor fail out of bankruptcy, the lending institution can seek relief through the court. When debtors are unable to adhere to the terms of repayment, lenders can request the bankruptcy revert to Chapter 7 (liquidation). Once permission is granted, lenders can immediately initiate foreclosure proceedings. In some cases, foreclosure can occur in as little as three days.
While the mortgage bankruptcy bill provides added protection for some homeowners, not everyone is eligible for the protection it provides. Those considering personal bankruptcy should seek legal counsel from a qualified bankruptcy attorney.
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