On January 6, 2009, Senator Dick Durbin (D, IL) introduced Senate Bill 61 called the “Helping Families Save Their Homes in Bankruptcy Act of 2009.” The bill has several provisions, which can be analyzed by following the above link, but the main purpose of the bill is to allow homeowners in a Chapter 13 bankruptcy case to reduce the amount of liens (mortgages) against their home down to the value of the home and modify the payments. This is known as lien stripping in bankruptcy.
For example, if your home is worth $400,000 and you owe $350,000 to the First Mortgage and $100,000 to the second, you would theoretically be able to reduce the lien of the second mortgage down to $50,000, and then reamortize (modify) the payments based on that amount. (The remaining $50,000 that was taken off would be treated as an unsecured claim and paid whatever percentage the other unsecured creditors were to receive in the case).
This is a potentially significant development and one can reasonably expect President Obama to sign this law if it passes both houses of Congress. Check back often for the progress on this new legislation.