The Orlando bankruptcy court is preparing to adopt a rule providing for mandatory mediation between homeowners and their mortgage companies to facilitate mortgage modification. Congress rejected a change in the bankruptcy code that would have empowered Chapter 13 debtors to force reduction in their first mortgage principal to their residence’s current fair market value. This proposed procedural rule will not circumvent the bankruptcy code and will not force reduction of first mortgage principal. What the rule will do is enable Chapter 13 debtors by motion filed with the court to compel a bank representative with full authority to modify mortgages to meet with the debtor and an independent mediator to negotiate in good faith a possible modification of the debtor’s first mortgage terms. The terms and the conditions of the rule are expected to be announced shortly. This bankruptcy rule should be a big help to debtors who want to save their primary residence from foreclosure.
Bankruptcy Court to Require Mortgage Modification with Chapter 13 Debtors
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