Principal Payment Plan Proposed by NACBA

This proposal by the National Association of Consumer Bankruptcy Attorneys (NACBA) would allow homeowners who enter a chapter 13 bankruptcy to reduce their interest rate to zero for the term of their plan. This would allow the payments to be applied directly to principal and help the homeowner dig out from a possible negative equity situation. This would encourage many people in a chapter 13 bankruptcy to stay in their homes, instead of letting their home go through short sale or foreclosure. If people are allowed to stay in their homes, it would help the housing market recover by decreasing the number of short sales or foreclosures for sale. It would also reduce foreclosure related costs by the banks holding the notes. If this was coupled with the ability of homeowners to strip off wholly unsecured junior loan, it would encourage many of my clients to keep their homes. Instead many of my clients choose to let homes go, due to no equity for the foreseeable future, or inability to make the mortgage payments.