Comments on: Did U.S. Bankruptcy Laws Exacerbate the Housing Crisis? http://wallstreetpit.com/12540-did-us-bankruptcy-laws-exacerbate-the-housing-crisis Wed, 08 Feb 2012 22:13:42 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Steve Burton http://wallstreetpit.com/12540-did-us-bankruptcy-laws-exacerbate-the-housing-crisis#comment-84289 Steve Burton Wed, 02 Dec 2009 02:26:48 +0000 http://wallstreetpit.com/?p=12540#comment-84289 I do not believe the reform of the Bankruptcy Code in 2005 made declaring bankruptcy more difficult, increased mortgage defaults and home foreclosures at all. I speak from my experience as a personal bankruptcy attorney of over twenty-five years practicing in the Greater Los Angeles area. Yes, bankrutpcy did become more expensive, the filing fees went up, the attorney fees increased because the practice area became more complex and risky (malpractice insurance rates went up a bit) and prospective bankrupts needed to obtain pre-bankruptcy counseling prior to filing the case (at a maximum fee of no more the $50), but I do not believe these factors combined significantly to sharply reduce, as opined by the article, the number of filings. I think the filings reduced simply because the law reforms triggered a record number of bankruptcies in 2005! The fear bankruptcy laws were going to be significantly altered made many commence a case they had probably needed for years. That is what I saw in my practice. The law change cleared the room of people needing bankruptcy relief, at that moment in time. It took about a year for the regular case load to come back in my small, solo law practice, but when it did, it coincided with the beginning of the sub-prime mortage meltdown in 2007. New case filings commenced in earnest in late 2007 and by mid 2008 the pot was to a full boil. I know I speak for my colleagues here in the Central District, we have not seen the worst of it yet. I do agree with the article's observation that homeowners who default on their mortgages also gain from filing for bankruptcy. Bankruptcy is a powerful tool which homeowners may be able to use to restructure junior loans to thier primary residences and eliminate overwhelming credit card debt while focusing on a repayment plan to cure primary mortgage loan defaults. Homeowners in trouble should seek out a bankruptcy attorney right away to learn of their rights in the their states. Loan modification is an anemic remedy. There are too many crooks in that dubious business. Maybe, if we can get the Obama administration to demonstrate leadership and deliver on the promise of no more politics as usual, we can get the Congress to pass the Durbin Amendment and the Conyers Bill to give bankruptcy judges the power to modify primary mortgage loans on personal residences. Maybe then we will see an end to all of these toxic pick-a-pay and negative amoritation loans, keep people in their homes and stick it to the banks like they have been sticking it to the homeowners! I do not believe the reform of the Bankruptcy Code in 2005 made declaring bankruptcy more difficult, increased mortgage defaults and home foreclosures at all. I speak from my experience as a personal bankruptcy attorney of over twenty-five years practicing in the Greater Los Angeles area. Yes, bankrutpcy did become more expensive, the filing fees went up, the attorney fees increased because the practice area became more complex and risky (malpractice insurance rates went up a bit) and prospective bankrupts needed to obtain pre-bankruptcy counseling prior to filing the case (at a maximum fee of no more the $50), but I do not believe these factors combined significantly to sharply reduce, as opined by the article, the number of filings. I think the filings reduced simply because the law reforms triggered a record number of bankruptcies in 2005! The fear bankruptcy laws were going to be significantly altered made many commence a case they had probably needed for years. That is what I saw in my practice. The law change cleared the room of people needing bankruptcy relief, at that moment in time. It took about a year for the regular case load to come back in my small, solo law practice, but when it did, it coincided with the beginning of the sub-prime mortage meltdown in 2007. New case filings commenced in earnest in late 2007 and by mid 2008 the pot was to a full boil. I know I speak for my colleagues here in the Central District, we have not seen the worst of it yet.

I do agree with the article’s observation that homeowners who default on their mortgages also gain from filing for bankruptcy. Bankruptcy is a powerful tool which homeowners may be able to use to restructure junior loans to thier primary residences and eliminate overwhelming credit card debt while focusing on a repayment plan to cure primary mortgage loan defaults. Homeowners in trouble should seek out a bankruptcy attorney right away to learn of their rights in the their states. Loan modification is an anemic remedy. There are too many crooks in that dubious business.

Maybe, if we can get the Obama administration to demonstrate leadership and deliver on the promise of no more politics as usual, we can get the Congress to pass the Durbin Amendment and the Conyers Bill to give bankruptcy judges the power to modify primary mortgage loans on personal residences. Maybe then we will see an end to all of these toxic pick-a-pay and negative amoritation loans, keep people in their homes and stick it to the banks like they have been sticking it to the homeowners!

]]>