Clearly the big banks saw the upcoming squeeze of the middle class. The changes in the bankruptcy laws protect the banks against the middle class walking away from debt.
Under the old rules (chapter 7) if an individual got into serious debt, he or she could file bankruptcy and the debt would be completely discharged – giving the debtor a fresh start. Under the new rules, if the debtor has any money ($130/month)left over after basic living expenses, he or she must pay off a sliding scale of the debt over the next few years.
So our indebt middle class homeowner who has maxed out credit cards to pay growing variable mortgage payments will not get a fresh start. He or she will be repaying the banks for years to come. Although the mortgage debt does not follow the borrower, the credit card, automobile, and some HELOC’s do. Although the debtor can protect $125k homestead exemption, this debt service could keep the previous homeowner out of the home market for some time to come. The homestead exemption could be meaningless if the bubble takes the home equity out of the equation.