but the two parties have entered a contract that’s terms are determined by the value of an goods being exchanged. When a judge alters the value of those goods (in this case adjusts the principal of the mortgage down) are they not injecting themselves (unconstituionally) into a contract?
see this is where the mistake is happening.
The judge is only determining how much of the loan is undercollateralized.
upon filing you create an “estate” much like a death creates an “estate”.
The judge is determining the asset value, with the help of the US Trutees office.
The lender has a full opportunity to say that the mortgage is worth less than the collateral.
KEEP IN MIND, second mortgages are being wiped out now and this process is available to investment property under current law.
Essentially this is the bankruptcy system giving primary residence owners the first right of refusal at a liquidation value auction.
If it did not go to the debtor at the liquidation price, then it would have been sold in a forclosure sale at that liquidation price.
remember the goal is to get this asset valued and back into the stream of commerce.