Major Asset Manager Proposes Allowing Mortgage Modifications in Bankruptcy

BlackRock, the world’s largest asset manager, has proposed creating a bankruptcy option that allows modification of home loans in bankruptcy. Interestingly, BlackRock is not proposing that it be done in Chapter 13, but rather through some other bankruptcy route that allows all of the unsecured debt to be discharged so that home owners can focus on making the new payment on their mortgage. I think that Chapter 13 is still the best place for allowing loan modifications, especially in districts where there is no set minimum that has to be paid to unsecured creditors. Chapter 13 trustees, debtors’ attorneys, creditors’ attorneys and bankruptcy judges are the best-equipped people to handle these types of modifications, because they do it every day with every other type of collateral.