Jun 01,2010
Amendment #534 authorizes bankruptcy courts to modify the terms of mortgages made on homeowners’ primary residences, a practice which is barred by current law. The amendment would permit bankruptcy courts to restructure the debt on home mortgages by reducing the principal owed, extending repayment periods, reducing interest rates, and prohibiting, reducing, or delaying future interest rate increases. Bankruptcy law currently permits such restructuring only for vacation homes, family farms, and yachts. Under this legislation, eligibility is limited to homeowners with mortgages originated before the enactment of the amendment who have received notice that a foreclosure may be commenced. The legislation restricts the situations in which bankruptcy judges can reduce – or “cramdown” – the principal owed.
