WASHINGTON, DC-The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, signed into law by President Bush on April 20, goes into effect today, changing the rules for bankruptcy protection filers who would otherwise have had most of their debts eliminated. The new legislation contains provisions that will spare mortgage lenders and multifamily property owners from suffering great financial losses due to the eradication of filers' debts.
Under the previous guidelines of the law, multifamily property residents who filed for bankruptcy under Chapter 7 were allowed to remain in their rental apartments without paying rent for several months. New provisions, however, have closed that loophole, forcing those wishing to file for Chapter 7 to file for Chapter 13 where they will be required to pay many of their debts under a repayment plan.
Additionally, previous regulations left commercial/multifamily lenders holding the bag, as well, due to a $4 million cap on single asset real estate bankruptcies in which Chapter 11 filers could halt the foreclosure process.
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