Senate Banking Chairman Christopher J. Dodd (D-CT) said Wednesday that he plans to introduce legislation soon that would rewrite portions of the bankruptcy code. His package will include language that would change the treatment of mortgage debt to help struggling property owners hold on to their homes, considering debtors’ “individual circumstances” when determining their ability to pay off their debts. It also would ensure that medical debts can always be discharged in bankruptcy.

In response to problems in the subprime mortgage market, other lawmakers in both chambers already have been pressing changes to the bankruptcy law similar to Dodd’s mortgage proposal. His measure would allow bankruptcy courts to modify the terms of home mortgages during bankruptcy proceedings, something prohibited under current law. In the House, members also have been working on a deal to pass similar legislation (HR 3609). The Judiciary Committee on November 7, postponed a scheduled markup of the measure after a compromise designed to win some Republican support fell through.