Bankruptcy Bill Passes Senate

WASHINGTON, DC-District-headquartered multihousing and mortgage banking industry organizations have tipped their hats to the US Senate for its passage last night of S. 256, the Bankruptcy Abuse Prevention and Consumer Act of 2005.

“The bill includes a provision that removes the $4-million cap on single asset bankruptcies which will help reduce our commercial/multifamily members’ vulnerability for assets valued over $4 million,” Kurt Pfotenhauer, senior vice president for government affairs for the Mortgage Bankers Association, explains.

The legislation is essentially designed to allow creditors to collect some funds owed by consumers who file for bankruptcy, but the aforementioned provision closes a loophole that many in the housing industry have called an abuse of the system for years. That loophole has allowed renters seeking to skirt eviction by filing for bankruptcy to live rent-free in their apartments for months, until the courts lift the stays. In such instances, the property owner loses money that can be used for building maintenance and other responsibilities, the availability of apartments for potential renters’ decreases and prices for rental housing at these properties increases.