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April 10, 2009

Prepackaged Chapter 13s?

"The Housing Crisis and Bankruptcy Reform: The Prepackaged Chapter 13 Approach" by Eric Posner and Luigi Zingales can be accessed here.  They propose

"what we call a prepackaged Chapter 13 bankruptcy, in which the mortgage is automatically readjusted in line with the decline of housing prices in the homeowner’s ZIP code. The homeowner ends up with positive equity in his house, so that he will either maintain the house or sell it outside foreclosure, and the creditor ends up with a claim of greater value than the foreclosure price of the house. Because both parties are made better off, the cost of credit should not increase in the long run; and taxpayers do not have to subsidize the scheme." 

April 10, 2009 in Article Reviews | Permalink

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