S. 2136 - Helping Families Save Their Homes in Bankruptcy Act of 2007

S 2136

110th CONGRESS
1st Session

S. 2136

To address the treatment of primary mortgages in bankruptcy, and for other purposes.

IN THE SENATE OF THE UNITED STATES

October 3, 2007

Mr. DURBIN (for himself and Mr. SCHUMER) introduced the following bill; which was read twice and referred to the Committee on the Judiciary

A BILL

To address the treatment of primary mortgages in bankruptcy, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Helping Families Save Their Homes in Bankruptcy Act of 2007'.

TITLE I--MINIMIZING FORECLOSURES

SEC. 101. SPECIAL RULES FOR MODIFICATION OF LOANS SECURED BY RESIDENCES.

(a) In General- Section 1322(b) of title 11, United States Code, is amended--

(1) in paragraph (10), by striking `and' at the end;

(2) by redesignating paragraph (11) as paragraph (12); and

(3) by inserting after paragraph (10) the following:

`(11) notwithstanding paragraph (2) and otherwise applicable nonbankruptcy law--

`(A) modify an allowed secured claim secured by the debtor's principal residence, as described in subparagraph (B), if, after deduction from the debtor's current monthly income of the expenses permitted for debtors described in section 1325(b)(3) of this title (other than amounts contractually due to creditors holding such allowed secured claims and additional payments necessary to maintain possession of that residence), the debtor has insufficient remaining income to retain possession of the residence by curing a default and maintaining payments while the case is pending, as provided under paragraph (5); and

`(B) provide for payment of such claim--

`(i) for a period not to exceed 30 years (reduced by the period for which the loan has been outstanding) from the date of the order for relief under this chapter; and

`(ii) at a rate of interest accruing after such date calculated at a fixed annual percentage rate, in an amount equal to the most recently published annual yield on conventional mortgages published by the Board of Governors of the Federal Reserve System, as of the applicable time set forth in the rules of the Board, plus a reasonable premium for risk; and'.

(b) Conforming Amendment- Section 1325(a)(5) of title 11, United States Code, is amended by inserting before `with respect' the following: `except as otherwise provided in section 1322(b)(11) of this title,'.

SEC. 102. WAIVER OF COUNSELING REQUIREMENT WHEN HOMES ARE IN FORECLOSURE.

Section 109(h) of title 11, United States Code, is amended by adding at the end the following:

`(5) Paragraph (1) shall not apply with respect to a debtor who files with the court a certification that a foreclosure sale of the debtor's principal residence has been scheduled.'.

TITLE II--PROVIDING OTHER DEBTOR PROTECTIONS

SEC. 201. COMBATING EXCESSIVE FEES.

Section 1322(c) of title 11, the United States Code, is amended--

(1) in paragraph (1), by striking `and' at the end;

(2) in paragraph (2), by striking the period at the end and inserting `; and'; and

(3) by adding at the end the following:

`(3) to the extent that an allowed secured claim is secured by the debtor's principal residence, the value of which is greater than the amount of such claim, fees, costs, or charges arising during the pendency of the case may be added to secured debt provided for by the plan only if--

`(A) notice of such fees, costs or charges is filed with the court before the expiration of the earlier of--

`(i) 1 year after the time at which they are incurred; or

`(ii) 60 days before the conclusion of the case; and

`(B) such fees, costs, or charges are lawful, reasonable, and provided for in the underlying contract;

`(4) the failure of a party to give notice described in paragraph (3) shall be deemed a waiver of any claim for fees, costs, or charges described in paragraph (3) for all purposes, and any attempt to collect such fees, costs, or charges shall constitute a violation of section 524(a)(2) of this title or, if the violation occurs before the date of discharge, of section 362(a) of this title; and

`(5) a plan may provide for the waiver of any prepayment penalty on a claim secured by the principal residence of the debtor.'.

SEC. 202. MAINTAINING DEBTORS' LEGAL CLAIMS.

Section 554(e) of title 11, United States Code, is amended by adding at the end the following:

`(e) In any action in State or Federal court with respect to a claim or defense asserted by an individual debtor in such action that was not scheduled under section 521(a)(1) of this title, the trustee shall be allowed a reasonable time to request joinder or substitution as the real party in interest. If the trustee does not request joinder or substitution in such action, the debtor may proceed as the real party in interest, and no such action shall be dismissed on the ground that it is not prosecuted in the name of the real party in interest or on the ground that the debtor's claims were not properly scheduled in a case under this title.'.

SEC. 203. RESOLVING DISPUTES.

Section 1334 of title 28, United States Code, is amended by adding at the end the following: `Notwithstanding any agreement for arbitration that is subject to chapter 1 of title 9, in any core proceeding under section 157(b) of this title involving an individual debtor whose debts are primarily consumer debts, the court may hear and determine the proceeding, and enter appropriate orders and judgments, in lieu of referral to arbitration.'.

SEC. 204. ENACTING A HOMESTEAD FLOOR FOR DEBTORS OVER 55 YEARS OF AGE.

(a) In General- Section 522(b)(3) of title 11, United States Code, is amended--

(1) in subparagraph (B), by striking `and' at the end;

(2) in subparagraph (C), by striking the period at the end and inserting `; and'; and

(3) by adding at the end and inserting the following:

`(D) if the debtor, as of the date of the filing of the petition, is 55 years old or older, the debtor's aggregate interest, not to exceed $75,000 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a principal residence, or in a cooperative that owns property that the debtor or a dependent of the debtor uses as a principal residence.'.

(b) Exemption Authority- Section 522(d)(1) of title 11, United States Code, is amended by inserting `or, if the debtor is 55 years of age or older, $75,000 in value,' before `in real property'.

SEC. 205. DISALLOWING CLAIMS FROM VIOLATIONS OF CONSUMER PROTECTION LAWS.

Section 502(b) of title 11, United States Code, is amended--

(1) in paragraph (8), by striking `or' at the end;

(2) in paragraph (9), by striking the period at the end and inserting `; or'; and

(3) by adding at the end the following:

END