March 1, 2009
Cramdown Bill to Come to a Vote in the House on Tuesday
A summary (of the big stuff) is as follows:
1. Secured debts where the collateral is the debtor's underwater home will not be included in the chapter 13 eligibility test in Section 109. A debtor who has received notice from the lender that it may commence foreclosure will not have to do the credit counseling.
2. A pre-existing loan on the debtor's home where the debtor has been told by the lender that a foreclosure may be commenced, may be modified in a chapter 13 to pay only the secured portion per Sec 506(a)(1); provide for payment of the secured portion over 40 years at a fixed and reasonable interest rate. If the home is sold before the chapter 13 discharge, the profit must be shared with the lender.
3. The debtor must certify in the chapter 13 that he attempted, at least 15 days before filing, to "contact the lender regarding modification" unless a foreclosure sale is scheduled within 30 days after the petition date.
4. This applies to existing chapter 13 cases provided the debtor tries to work it out first before filing a request for modification.
5. To permit bifurcation of the secured claim, the court must find that the modification is proposed in good faith and the debt was not incurred by fraud.
6. The Effective Date is the date of enactment.
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