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.