Bankruptcy Court in Poughkeepsie Pioneers New Step to Prevent Foreclosures

February 22nd, 2009 | Tags: Foreclosures

The bankruptcy court in Poughkeepsie has pioneered a new measure to mitigate the foreclosure crisis. The name of the operation is Loss Mitigation and it is a path finding step that many others is likely to emulate. Local bankruptcy attorneys and court officials who operate at the national courts branch at Poughkeepsie created the new programme. Their field of specialization is representing the different parties involved in a foreclosure case – borrowers, lenders, or trustees. It is claimed that the step is the first of its type in the entire country.

In Loss Mitigation a new set of rules has been laid out that will try to enforce a new deal for the foreclosure victims. The foreclosure process allows for the lender to take possession of the house and try selling it to realize unpaid dues.

The judge who runs the office at Poughkeepsie Cecilia Morris said, “The bankruptcy code does not allow a bankruptcy judge to rewrite a residential mortgage. But it does allow me to say you need to talk. And that’s basically what this is. We tend to describe it as mediation without a mediator.”

She explained that the idea took shape after a series of casual conversations followed by planned discussion during some of the critical planning sessions that had been sponsored by the court. Ultimately it led to the formal writing of the rules.

Richard Carelli of the administrative office, USA Courts, Washington said he was unaware of any such second programme in any bankruptcy district. He added, “It’s certainly something that would be deemed innovative.”

The programme is now operable all through the southern district of New York after Chief Judge Stuart m. Bernstein signed an order in December. This was preceded by a vote taken by the Board of Judges of the district.

This programme can be invoked voluntarily either by the lender or the borrower in a bankruptcy in which his or her house is at risk. Judge Morris added, “In this division, one of the major reasons for filing is to save a home.”

But the banks hold a different viewpoint. They want to save the loan. The idea emanated from the lenders. So both the interests converge at the same point. Morris explained, “They both have the same interest. The lender doesn’t really want the house and the homeowner doesn’t want to give up the home.”