Modifications In Bankruptcy Law Can Help Reduce Tax Foreclosure Properties

Modifications In Bankruptcy Law Can Help Reduce Tax Foreclosure Properties

By:


There is an oddity in the current bankruptcy law. Bankruptcy judges can reduce or modify the principal for bankrupt properties like a vacation home, a car or a boat. However, these same judges are helpless and cannot do anything to modify the principal to a mortgage for a primary residence. This is the main reason why people with tax foreclosure properties end up losing their homes to banks without even filing for bankruptcy.

One reason is because of this oddity, and the other is that filing for Chapter 13 is a long, unpleasant and agonizing task that will stain your credit record for a minimum of 7 years, as well as ending up in higher mortgage payments as skipped payments and resulting fees will be added to the principal. Homeowners are still responsible for paying this under a repayment plan.

Legislation is underway to remedy this, and it has the backing of President Barack Obama. The new proposed law would amend this oddity in the bankruptcy laws and would give more power to judges to modify primary home mortgages and finally stop the increase of tax foreclosure properties. Democrats and advocates have been pushing for this legislation for two years, only to be opposed by Republicans and the mortgage industry.

Proponents of the new law are not concerned that people with tax foreclosure properties would start rushing and filing for Chapter 13. The requirements of the procedure plus the stain on their credit records will be an effective deterrent. What the law is trying to achieve is to provide an incentive for banks and mortgage providers to stop and reconsider filing for foreclosures and work out a voluntary loan modification program with the homeowner, instead of heading to a bankruptcy court.

Understandably, the bill would face stiff opposition from the mortgage industry. Their argument is that if judges are allowed to modify the principal of primary residential tax foreclosed properties, consumers would end up having higher loan costs as lenders would need to increase to compensate for the added risks. However, this opposition is losing strength as foreclosures continue to cause dramatic declines in home prices that mortgage providers would have no choice but to comply to stem this tide.

The bill met strong opposition last year from Republicans and the veto threat from former President George W. Bush. Now, more Democrats are seated and Obama is in the drivers seat.

About the Author:
Joseph Smith has been educating buyers on the finer points of tax foreclosure properties purchase at ForeclosureDeals.com for over ten years. Click here to visit and read more advice on finding foreclosure properties.



Article Originally Published On: http://www.articlesnatch.com


Tags: , ,

|

Loading...
Related....
Videos...

Recent Real-Estate Articles

Comments

Still can't find what you are looking for? Search for it!

Loading

Site Navigation:

Copyright 2005-2011 ArticleSnatch, LLC - All Rights Reserved.
Privacy Policy | Terms of Service.