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LA TIMES WASHINGTON — As congressional negotiators labored over the giant financial bailout plan last week, business leaders saw little to applaud in more than a few of the ideas under discussion, including one that proposed changing the nation’s bankruptcy laws to make it easier for homeowners to downsize troubled home mortgages.
On Sunday, when the head-butting ended and the dust cleared, a well-funded coalition of banking and mortgage industry lobbyists had reason to celebrate. The final bill included no changes in federal bankruptcy laws.
Americans who take out loans to purchase cars, boats and even investment properties can file for bankruptcy protection and have a judge restructure their payments. But that’s not the case with their home mortgages. Since 1978, bankruptcy laws have prohibited judges from adjusting loans on a “principal residence.”
Some Democrats had called for the bailout bill to change bankruptcy laws to permit such restructuring as a way to offer something for Main Street America.
