The Senate voted decisively against allowing residential mortgages to be modified in Chapter 13 bankruptcy cases.  It was a decisive vote.  Only 41 Senators voted in favor – we know that 60 senators would have had to be in favor to get past a filibuster. 

Why is it that a shopping center developer like General Growth can cram down their mortgages but ordinary American homeowners can’t?  Why is it that bankruptcy is OK for Chrysler or GM to cram-down their reluctant hedge-fund bondholders but it’s not OK for an American homeowner who can’t even get a mortgage lender to talk to her?

Senator Durbin tells us exactly why – and we should be angry about this!  We should be furious.  People should be marching on Washington.  Yet we seem not to care.  We seem to think our neighbor should suffer, not realizing that in so doing, we are hurting ourselves.

                The banks — hard to believe in a time when we’re facing a banking crisis -
                many of the banks created –  are still the most powerful lobby on Capitol Hill.
                And they frankly own the place!

You would think that We, the People own the Senate.  But we don’t.  Unless We, the People, tell Senators that we won’t condone them acting as lackeys for the banks, the Senate will continue to take the banks’ money and stick it to you.

Why do banks care so much?  The answer is in three little words – “Mark to Market.”  This means that if  lenders have to realistically value their assets – like their residential mortgages – to what they are really worth – they would have less assets than liabilities.  In other words they would be broke – bankrupt – insolvent – closed – in receivership – taken over by the FDIC.  Moreover, bank chairmen, directors, officers and their ilk would be unemployed, lose stock options, perks, private jets and their rich and famous lifestyle in general.  This, dear readers, is what the Senate now stands for.  

Henry Sommers, past president of the National Association of Consumer Bankruptcy Attorneys put it well when he said:

“In terms of what this was really about, my opinion is that the insolvent banks do not want to reveal the emperor’s lack of clothes, because if their assets were marked to market, their true value, the insolvency would be obvious. Fighting cramdown is part of that, as is the Obama mortgage plan, which does not require any principal reductions. The negotiations about the bill left me very doubtful that many people will even get the Obama plan modifications. When  there are more foreclosures threatening banks’ balance sheets (and further dragging down the economy) they will want more bailouts.

Unfortunately, Summers and Geithner can’t escape the bank culture whence they came. They cannot contemplate shutting down the insolvent banks and are therefore over a barrel. If you have not done so yet, you should definitely listen to the  This American Life’s show on the topic.”

If you’re mad as hell and won’t take it anymore, then gear up to support whoever will oppose any incumbent Senator who failed to stand up for you when they next run for election.  This is still a democracy, right?

If you are trying to get a mortgage modification or mortgage finance plan under the Obama Home Affordable Plan and can’t, please tell us about your experience.  We may be able to publicize your plight in the press or in Congress.

For bankruptcy help in Chicagoland, call Lakelaw now at 847 249 9100 or toll free at 1-866-LAKELAW (1 866 525-5359)

Banks may care about what you say on the financial statement in your loan application.  When you apply for a loan, the bank asked you about your assets and liabilities.  If you told the bank you have less than you actually own, this may not be a problem. Some financial statements create problems.  Here are some common problems in financial statements:

• You claim to be the owner of something you really don’t own
• You claim to own something outright when you really own it with your spouse
• You claim to own something in joint tenancy when you really own it as tenants in common
• You overstate the value of your personal property
• You overstate how much you have been earning.

If the bank or another lender justifiably relies on something you put in a financial statement, you could be in trouble  if you knew your statements were material and not true when you made them. A bank might seek to bar dischargeability of your debt even if you do file a bankruptcy case.  Sometimes a bank might try to bar your discharge altogether. A bank may threaten to prosecute you for bank fraud.

Banks today are under severe stresss.  If you plan to file a bankruptcy case, you should consider how a bank might react to your filing.  Tell your bankruptcy lawyer everything you told your bank when you took out your loan.  It will help your lawyer advise you and help you to be ready for any claim a bank or other creditor might make against you during the course of your bankruptcy case.   

For more information, check Bankruptcy Code section 523(a).

Lakelaw defends people against complaints under Bankrutpcy Code section 523(a) to determine dischargeability of debt and against complaints under Bankruptcy Code section 727 to bar discharge.

For more information about discharge in bankruptcy, click here

Call Lakelaw now at 1 866 LAKELAW (1 866 525-5359).