House Bill Could Give Some Foreclosure Relief
By Foreclosure-Fighter staff writer
If you're facing foreclosure, one method to prevent losing your house is filing for Chapter 13 bankruptcy, which activates an automatic stay to prevent collectors from collecting any debts. Since the new bankruptcy laws enacted in October, 2005, though, debtors are required to complete a credit counseling course before filing for bankruptcy, or their petition cannot be accepted.
When the laws were very new, many people lost homes, cars, and other assets because they hadn't completed the credit counseling course. And, for those filing for Chapter 13 bankruptcy as an emergency anti-foreclosure measure, big problems began to arise, as one Texas judge discovered.
The Sosas were a couple experiencing financial difficulties: they were working with their mortgage company to figure out exactly what they owed, and were hoping they would be able to pay. When they tried to make a payment at the last minute, their lien holder refused to accept it. To prevent foreclosure, the Sosas tried to file for Chapter 13 bankruptcy.
But their petition was not accepted by the court.
Why? The Texas judge who heard their case said that his "hands were tied" in the matter: even though he strongly criticized the strictness of the credit-counseling requirements, he noted that the law was very clear that debtors needed to complete the credit counseling before qualifying for Chapter 13 bankruptcy.
As the law currently stands, even those who find themselves in the direst circumstances (like the Sosas) cannot waive the credit counseling requirement. But that might be about to change.
On October 4th, the House Committee on Commercial and Administrative Law approved a bill that would amend U.S. Bankruptcy Code so that some debtors trying to save their home would not need to fulfill the credit counseling requirement. If the bill were to pass, it would require debtors only to show proof that foreclosure proceedings had been begun on their home.
Currently known as HR 3609, the bill could be reviewed by the rest of the House as early as this week. In addition to the waiving of the credit counseling requirement, the bill's current provisions include a lengthened allowable repayment period for debt that has been secured by the filer's personal residence.
Various representatives introduced other additions to the bill, but none was accepted. Some abandoned their proposals in hopes of getting the bill more quickly approved across the political spectrum.
For updates on HR 3609, check back with the Foreclosure-Fighter website. For more information about preventing foreclosure with Chapter 13 bankruptcy or refinancing, please follow the links provided.