A provocative and interesting idea to address the foreclosure and bankruptcy crisis: a new Chapter M for Mortgage bankruptcy.
Chapter M for Mortgage bankruptcy. It would remove foreclosure actions from state court to federal bankruptcy court. Successful petitions can be offered a standardized pre-packaged bankruptcy plan. The plan would be based on HAMP modification guidelines (interest rate reduction to achieve 31% DTI goal, plus cramdown to address negative equity.
And going through the process can give the lender clean title. Any solution which can simultaneously address banks’ unwillingness to offer loan modifications to otherwise qualified distressed homeowners and the litany of title problems created in the wake of cases like U.S. Bank v. Ibanez should be seriously considered.