By Richard Koman, Sonoma County-Santa Rosa-Petaluma bankruptcy and debtor attorney ("We are a debt relief agency")
Back in 2009, Congress considered trying to save homes by changing the bankruptcy laws to allow judges to "cram down" homeowners' principal balance on their primary residence. Great idea, which passed the House but died in the Senate.
America being what it is, bankruptcy judges can cram down principal on lots of goodies, like vacation homes, but not the roof over your head. Since Congress is apparently not going to challenge the banks on this inequity, the National Association of Consumer Bankruptcy Attorneys has a radical new proposal that just might work for troubled homeowners in Sonoma County and around the country.
The new proposal would allow debtors to file Chapter 13 plans and freeze interest rates at zero. In other words, you would pay a regular monthly payment (31% of income) but ALL of that money would go to pay down your principal. NACBA hopes that by the time you leave Chapter 13, five years later, your will have regained an equity position, instead of being hopelessly underwater.
The payback:
In exchange for this benefit, the borrower agrees to a general settlement of all claims against the lender and servicer and avoiding future title and loan litigation.
The association says it's a win-win-win: homeowners, the federal government, private investors -- even local communities benefit from stabilizing home ownership. All that's needed the make it work: agreement of investors, government agencies and insurers -- Congress would not have to pass any legislation!
