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S. 61 (111th): Helping Families Save Their Homes in Bankruptcy Act of 2009

The text of the bill below is as of Jan 6, 2009 (Introduced).


S 61 IS

111th CONGRESS

1st Session

S. 61

To amend title 11 of the United States Code with respect to modification of certain mortgages on principal residences, and for other purposes.

IN THE SENATE OF THE UNITED STATES

January 6, 2009

Mr. DURBIN (for himself, Mrs. BOXER, Mrs. FEINSTEIN, Mr. HARKIN, Mr. SCHUMER, and Mr. WHITEHOUSE) introduced the following bill; which was read twice and referred to the Committee on the Judiciary


A BILL

To amend title 11 of the United States Code with respect to modification of certain mortgages on principal residences, 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 2009’.

SEC. 2. ELIGIBILITY FOR RELIEF.

    Section 109 of title 11, United States Code, is amended--

      (1) by adding at the end of subsection (e) the following: ‘For purposes of this subsection, the computation of debts shall not include the secured or unsecured portions of--

      ‘(1) debts secured by the debtor’s principal residence if the current value of that residence is less than the secured debt limit; or

      ‘(2) debts secured or formerly secured by real property that was the debtor’s principal residence that was sold in foreclosure or that the debtor surrendered to the creditor if the current value of such real property is less than the secured debt limit.’; and

      (2) by adding at the end of subsection (h) the following:

    ‘(5) The requirements of paragraph (1) shall not apply in a case under chapter 13 with respect to a debtor who submits to the court a certification that the debtor has received notice that the holder of a claim secured by the debtor’s principal residence may commence a foreclosure on the debtor’s principal residence.’.

SEC. 3. PROHIBITING CLAIMS ARISING 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:

      ‘(10) the claim is subject to any remedy for damages or rescission due to failure to comply with any applicable requirement under the Truth in Lending Act, or any other provision of applicable State or Federal consumer protection law that was in force when the noncompliance took place, notwithstanding the prior entry of a foreclosure judgment.’.

SEC. 4. AUTHORITY TO MODIFY CERTAIN MORTGAGES.

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

      (1) by redesignating paragraph (11) as paragraph (12),

      (2) in paragraph (10) by striking ‘and’ at the end, and

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

      ‘(11) notwithstanding paragraph (2) and otherwise applicable nonbankruptcy law, with respect to a claim for a loan secured by a security interest in the debtor’s principal residence that is the subject of a notice that a foreclosure may be commenced, modify the rights of the holder of such claim--

        ‘(A) by providing for payment of the amount of the allowed secured claim as determined under section 506(a)(1);

        ‘(B) if any applicable rate of interest is adjustable under the terms of such security interest by prohibiting, reducing, or delaying adjustments to such rate of interest applicable on and after the date of filing of the plan;

        ‘(C) by modifying the terms and conditions of such loan--

          ‘(i) to extend the repayment period for a period that is no longer than the longer of 40 years (reduced by the period for which such loan has been outstanding) or the remaining term of such loan, beginning on the date of the order for relief under this chapter; and

          ‘(ii) to provide for the payment of interest accruing after the date of the order for relief under this chapter at an annual percentage rate calculated at a fixed annual percentage rate, in an amount equal to the then 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

        ‘(D) by providing for payments of such modified loan directly to the holder of the claim; and’.

SEC. 5. 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 a semicolon, and

      (3) by adding at the end the following:

      ‘(3) the debtor, the debtor’s property, and property of the estate are not liable for a fee, cost, or charge that is incurred while the case is pending and arises from a debt that is secured by the debtor’s principal residence except to the extent that--

        ‘(A) the holder of the claim for such debt files with the court (annually or, in order to permit filing consistent with clause (ii), at such more frequent periodicity as the court determines necessary) notice of such fee, cost, or charge before the earlier of--

          ‘(i) 1 year after such fee, cost, or charge is incurred; or

          ‘(ii) 60 days before the closing of the case; and

        ‘(B) such fee, cost, or charge--

          ‘(i) is lawful under applicable nonbankruptcy law, reasonable, and provided for in the applicable security agreement; and

          ‘(ii) is secured by property the value of which is greater than the amount of such claim, including such fee, cost, or charge;

      ‘(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) or, if the violation occurs before the date of discharge, of section 362(a); and

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

SEC. 6. CONFIRMATION OF PLAN.

    Section 1325(a) of title 11, the United States Code, is amended--

      (1) in paragraph (8) by striking ‘and’ at the end,

      (2) in paragraph (9) by striking the period at the end and inserting a semicolon, and

      (3) by inserting after paragraph (9) the following:

      ‘(10) notwithstanding subclause (I) of paragraph (5)(B)(i), the plan provides that the holder of a claim whose rights are modified pursuant to section 1322(b)(11) retain the lien until the later of--

        ‘(A) the payment of such holder’s allowed secured claim; or

        ‘(B) discharge under section 1328; and

      ‘(11) the plan modifies a claim in accordance with section 1322(b)(11), and the court finds that such modification is in good faith.’.

SEC. 7. DISCHARGE.

    Section 1328 of title 11, the United States Code, is amended--

      (1) in subsection (a)--

        (A) by inserting ‘(other than payments to holders of claims whose rights are modified under section 1322(b)(11)’ after ‘paid’ the 1st place it appears, and

        (B) in paragraph (1) by inserting ‘or, to the extent of the unpaid portion of an allowed secured claim, provided for in section 1322(b)(11)’ after ‘1322(b)(5)’, and

      (2) in subsection (c)(1) by inserting ‘or, to the extent of the unpaid portion of an allowed secured claim, provided for in section 1322(b)(11)’ after ‘1322(b)(5)’.

SEC. 8. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

    (a) Effective Date- Except as provided in subsection (b), this Act and the amendments made by this Act shall take effect on the date of the enactment of this Act.

    (b) Application of Amendments- The amendments made by this Act shall apply with respect to cases commenced under title 11 of the United States Code before, on, or after the date of the enactment of this Act.