My intent is not to focus on the negativity surrounding the marketplace these days, God knows there has been enough of that going around.  But rather, I would like to highlight some little known (if at all) provisions of Chapter 13 Bankruptcies.  Specifically, as they pertain to mortgages.

We are seeing increases in foreclosures, that is a given.  More than likely there will be increased bankruptcy filings in the future as well.  Americans who do decide to work through the expensive and cumbersome requirements for filing Chapter 13 may not realize that there is a long standing provision that affects their mortgage.  The provision was not removed in the 2005 Bankruptcy reform.  That provision prohibits the ability to restructure the payment terms of most mortgages, namely those on primary homes.

So, in essence, filing for Chapter 13 protection due to inability to repay your debts may not be as helpful as you may have thought.  The chances are great that even if you are successful in gaining a Chapter 13 BK, your primary mortgage(s) will be left unchanged.

What about those mortgages not associated with your primary home?  Well, those fall into a different category and you likely will be able to restructure those loans.  So, those of you wealthy enough to own more than one home may be able to restructure your loans and keep the porperty or properties. This, while those struggling with their primary mortgages may still ose their homes, even though they went through the bankruptcy process.

The solution would be for Congress to reevaluate the bankruptcy process.  They were successful in making it harder to file and be approved for the Chapter 13 process, but their failure to address the primary home's mortgage situation leaves a serious gap in the overall protection of the American who must file.  Congress would probably be able to stave off some of the future foreclosures by reforming the laws again to allow for a restructuring of the primary mortgage(s). 

Don't get me wrong, I am not advocating that people file for BK.  That is likely the last thing you should do and the laws needed to be changed as many people abused the system.  However, for those that are drowning in debt, they should be able to have a path that will be do its job in helping them restructure all debt and not lose their home in the process.  Obviously, there has to be limitations to prevent abuse.