Presidential candidate Sen. Barack Obama has unveiled his proposal to change bankruptcy laws. And his plan includes doing something Congress declined to do earlier this year: allow bankruptcy courts to renegotiate the terms of mortgages.
A similar provision in an early version of Congress’s housing rescue plan was dropped in April after the White House and some lawmakers opposed the plan.
Obama’s proposal would also remove some of the bureaucratic hurdles to filing for personal bankruptcy that were imposed in 2005, establish a nationwide “homestead” level of equity that would be protected from creditors, and impose a 120-day moratorium on credit reporting agencies reporting negative credit information.
In a speech in Powder Springs, Ga., Obama said the plan would particularly help military families and elders, creating a “fast-track bankruptcy practice” for military families, cutting paperwork and red tape for bankruptcy filing, and allowing elders to more easily keep their homes, which he called ” the cornerstones of a secure retirement,” according to the Atlanta Journal-Constitution.
Robert Lawless, an expert cited in Obama’s policy paper, but unconnected to the campaign, told the Wall Street Journal that the plan is ambitious.
“This goes as far as anybody who’s had the ability to get things enacted into law has proposed,” Lawless said to the WSJ. (Sub. Req’d). “It is more targeted, rather than saying, ‘I want to go in and undo the 2005 bankruptcy law.’ I don’t’ think there’d be any political interest in doing that.”
Tucker Bounds, spokesman for Republican opponent Sen. John McCain responded in a statement to the Associated Press: “Eighteen Democrats and John McCain worked together on the bipartisan Senate bankruptcy bill, and Barack Obama’s rigid partisanship and self-promoting political attacks show that he’s a typical politician – which is the problem in Washington, not the solution.”