Bankruptcy Reform and Homeownership Risk

The personal bankruptcy system is part of a larger system of house-hold risk management. Much of the discussion about personal bankrupt-cy has focused on bankruptcy’s insurance role with respect to unsecured obligations like credit cards and medical bills. The passage of omnibus bankruptcy legislation coupled with dramatic changes in the home mort-gage market indicate, however, that it is time to devote more study to the role of the bankruptcy system in managing home mortgage related risks. In this article, Professor Melissa Jacoby identifies and begins to evaluate chapter 13 as a mortgagor protection law. She explores questions we should ask to determine whether bankruptcy is prolonging unsustainable homeownership. Professor Jacoby then considers the impact of two re-cent revisions to the Bankruptcy Code relating to credit counseling and repeat filers. She concludes that these kinds of revisions may promote sorting based on homeownership sustainability.

The full text of this Symposium is available to download as a PDF.