Marginal Successes, Revised Expectations, Broken Promises – A Presidency in Review: Proposed Chapter 13 Bankruptcy Reform Fails the American Dream

When a consumer debtor seeks bankruptcy protection and debt relief through Chapter 13’s Wage Earner Plan, the creditor-lender to the primary mortgage cannot be ordered by the bankruptcy judge to modify the loan agreement. Certainly, the primary mortgagee may voluntarily agree to modified terms – this does happen, albeit too infrequently. As the law stood during the 2008 presidential campaign, U.S. Bankruptcy judges lacked the power to order modification of the debtor’s primary home mortgage. Such cramdown power is left to junior mortgages, as first in time is still first in right.

Obama Promised Reform – Giving Bankruptcy Judges Cramdown Powers Over First Mortgages:

At a Colorado rally back on September 16, 2008, and at many additional campaign stops, then presidential candidate Barack Hussein Obama II promised to change the U.S. Bankruptcy Code’s treatment of indebted homeowners filing for relief under Chapter 13. Boldly, Obama made this pledge...