Senate may vote on bankruptcy bill this month

By Karey Wutkowski

WASHINGTON (Reuters) - Legislation that would allow bankruptcy judges to cut the mortgage debt of homeowners may get approved this month, the head of the U.S. Senate Banking Committee said on Thursday.

"We're going to try to get that adopted in the next couple weeks," Sen. Christopher Dodd, a Democrat, told a Consumer Federation of America conference.

Dodd also said he is pushing the Internal Revenue Service to allocate "resources" to help victims of the $65 billion scandal associated with financier Bernard Madoff. He did not elaborate on what types of resources the IRS could tap to help Madoff's victims.

The Securities Investor Protection Corp, a nonprofit agency set up by Congress to help investors with accounts at failed brokerage firms, can pay a single investor a maximum of $500,000. Madoff pleaded guilty on Thursday to orchestrating the biggest financial swindle in Wall Street history.

Regarding the bankruptcy legislation, Dodd said he and Sen. Dick Durbin, the No. 2 Democrat in the chamber, will discuss on Thursday or Friday how a Senate version of the bill should proceed.

A similar so-called "cramdown" bill has already been approved by the House to give bankruptcy judges the power to rewrite home mortgage terms.

The legislation is opposed by many banks and investors who worry the intrinsic value of contracts would be diminished. But advocates say the change would cut through the red tape holding up many mortgages from being modified into an affordable contract.

(Reporting by Karey Wutkowski; Editing by Phil Berlowitz, Bernard Orr)