Foreclosures.com: Bankruptcy Reform May Put Distressed Owners at Risk

SACRAMENTO, Calif.--(BUSINESS WIRE)--April 25, 2005--Foreclosures.com, a California based investment advisory firm specializing in distressed property, reported today that bankruptcy reform legislation recently passed by the U.S. Senate contains provisions that would put homeowners in financial distress in increased risk of losing their homes in foreclosure.

"The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 passed by the Senate on March 10 was intended to stop people from using bankruptcy as a way to escape from debts they should not have incurred in the first place," said Foreclosures.com president Alexis McGee. Ms. McGee went on to say that filing a petition for bankruptcy was a common tactic used by distressed homeowners to forestall foreclosure and borrow time in order to try to solve their financial problems.

“The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 passed by the Senate on March 10 was intended to stop people from using bankruptcy as a way to escape from debts they should not have incurred in the first place”

"In many cases," said Ms. McGee, "people get in over their heads by further encumbering their homes with equity lines of credit that are exhausted with purchases of consumer products and services such as cars and expensive vacations. Then, when interest rates rise, and home values stop increasing, they can no longer refinance and file a Chapter 7 bankruptcy petition to wipe out their debts and hold off foreclosure by their lender."

Ms. McGee was generally favorable toward the bankruptcy reform legislation but pointed to a provision in the bill that she said could worsen a homeowner's financial crisis and possibly lead to repossessions and foreclosure.

"Section 102 of the bill refers to a 'Means Test' that precludes people whose income exceeds the median for their state from filing a Chapter 7 petition," said Ms. McGee. "Instead, they must file under Chapter 13, and pay off their debt in 60 months or less." Ms. McGee pointed out, that if they have heavy credit card debt, their payments would increase and worsen their situation rather than relieve it. "Middle income families in this position could face the loss of their homes and cars."

Foreclosures.com has been publishing foreclosure property lists and assisting investors since 1992. They serve markets in selected major California counties, the metro areas of Las Vegas, Chicago, New York, and the state of New Jersey.

"It's better for people in crisis to sell their way out of foreclosure and make a fresh start," Ms. McGee added.