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Stripdowns and bankruptcy: lessons from agricultural bankruptcy reform

Author

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  • Thomas J. Fitzpatrick
  • James B. Thomson

Abstract

One type of financial reform being proposed to deal with the aftermath of the housing crisis is allowing bankruptcy judges the authority to modify residential mortgages in a way referred to as a stripdown. The reform is seen by some as a partial solution to the rise in foreclosures and as a Pandora?s box by others. But the debate is not new one. The 1980s farm foreclosure crisis sparked similar proposals and concerns. Congress decided to enact legislation that contained a stripdown provision, resulting in the creation of Chapter 12 in the bankruptcy code. The effects of Chapter 12 stripdown authority after its enactment shed light on the efficacy of allowing bankruptcy judges similar authority for housing loans.

Suggested Citation

  • Thomas J. Fitzpatrick & James B. Thomson, 2010. "Stripdowns and bankruptcy: lessons from agricultural bankruptcy reform," Economic Commentary, Federal Reserve Bank of Cleveland, issue Aug.
    • Handle: RePEc:fip:fedcec:y:2010:i:aug3:n:2010-9
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    File URL: https://www.clevelandfed.org/publications/economic-commentary/2010/ec-201009-stripdowns-and-bankruptcy-lessons-from-agricultural-bankruptcy-reform
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    Cited by:

    1. Joshua Goodman & Adam Levitin, 2014. "Bankruptcy Law and the Cost of Credit: The Impact of Cramdown on Mortgage Interest Rates," Journal of Law and Economics, University of Chicago Press, vol. 57(1), pages 139-158.
    2. International Monetary Fund, 2011. "United States: Selected Issues," IMF Staff Country Reports 2011/202, International Monetary Fund.

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