A new bill proposed by Illinois Senator Dick Durbin (D-IL) could change the face of bankruptcy if passed.
Sen. Durbin is behind the proposed “The Helping Families Save Their Homes Act”—a legislative proposal that will let families file for Chapter 13 bankruptcy to save their homes. The proposed legislation also gives judges the ability to modify mortgages to keep homeowners in their properties. Durbin’s bill is part of a legislative foreclosure prevention package backed by House and Senate Democrats.

“The law should give American families facing foreclosure the opportunity to negotiate a workout on their mortgages. This bill may help them reach a degree of financial stability — even when the market cannot,” Durbin said. “Small changes to an outdated bankruptcy code could help over 600,000 at risk families keep their homes, while affordably paying back their obligations. We should be giving families every reasonable tool to ensure they can keep a roof over their heads.”
Durbin’s office in a press release says the proposed bill will eliminate stipulations banning loan modifications on primary residences, increase the time debtors have to restructure loans and waive bankruptcy counseling requirements for families already deep into the foreclosure process.
Durbin’s suggestion that bankruptcy judges should have more authority to change loans touches on a hot topic that has drawn criticism from some professionals in the mortgage marketplace. In the past, the Mortgage Bankers Association has said while changes are needed, loan modifications from the bench could prove costly for homebuyers later on.
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