Bankruptcy

More on Bailout + Bankruptcy Reform

The National Association of Consumer Bankruptcy Attorneys* has joined the growing chorus of voices demanding that Congress not give in to rampant bullying pressure to act hastily in passing bailout legislation (something I wrote about on this blog right here). As I did in that post, they’ve suggested some language for others (specifically, bankruptcy attorneys) to use in communicating the need for mortgage reform concurrent with any bailout of finance industry giants to elected representatives:

As a constituent and bankruptcy attorney working to help families in our community save their home from foreclosure, I urge you to include court-supervised mortgage restructuring for financially distressed American homeowners in any package you approve to bail out Wall Street.  Why do I support this approach?

• The rapid deterioration of the financial sector has been fueled by the steep rise in delinquencies and foreclosures of risky mortgages.
• These mortgages have been sliced up and sold in complex financial instruments that now sit as “toxic assets” on the balance sheets of our largest banks.
• Every financial expert, including Treasury Secretary Paulson and Federal Reserve Chairman Bernanke, agree that we will not stabilize our financial markets until we stabilize the housing markets.
• The housing market will not stabilize absent a solution to the tide of foreclosures.
• Simply giving a government entity the authority to purchase the “toxic assets? of troubled financial institutions will not result in fewer foreclosures.    This is complicated, but the basic problem is that the government will not be buying mortgages …those mortgages have been carved up and sold to investors all over the world.  The government essentially would have to put all the pieces back together to modify the loan, which just is unrealistic.
• Court-supervised mortgage modification in Chapter 13 bankruptcy is perhaps the most effective tool for ending the foreclosure crisis.
• Court -supervised mortgage modification will not cost the U.S. taxpayer one penny, but will keep families on Main Street in their homes.   It deserves your support as you consider a taxpayer funded bailout of Wall Street.

This is much more nuanced and persuasive than my admittedly off-the-cuff attempt! Feel free to pull and use at will — omitting, of course, the language about being a bankruptcy attorney, unless of course you are one! — as I’m sure NACBA* just wants the message sent, and doesn’t care who sends it!

* Earlier versions of this post mistakenly referred to the group in question as NACA or the National Association for Consumer Advocates. The SC Bankruptcy & Consumer Law Blog regrets the error.

© 2008 SC Bankruptcy & Consumer Law Blog.