Many Americans are having trouble paying their mortgages. Foreclosures rose 75 percent in 2007, and the rise is continuing. Some homeowners simply can't afford the homes they bought, regardless of the mortgage terms. Lenders should foreclose on those mortgages. In other cases, homeowners have the financial ability to pay what they owe, even on the onerous terms to which they agreed. Those homeowners should have to pay as agreed.

Perhaps a million homeowners fall somewhere in between. They can't pay what they agreed but can pay more than their lenders could net from foreclosure. Owners in this category can afford their homes but not their mortgages. Most want to stay and are willing to pay what their home is worth. It is in their lender's economic interest to let them. Foreclosure is expensive, and lenders end up bearing most of the costs. Foreclosed houses tend to sell for less than the market price, thus driving housing prices down further — and generating more foreclosures.

Most plans for solving the mortgage crisis seek to promote communication between lenders and borrowers so they will make this mutually beneficial deal. Often, however, the mortgages have been sold and securitized. Each investor owns only a small fraction of each mortgage, making direct negotiations impractical.

Similar problems arise with auto loans, small business loans, syndicated bank loans and many other kinds of loans. For those, the federal bankruptcy courts provide a quick, efficient solution: They force lenders to accept restructuring proposals that offer the lenders more than they could get any other way.

Home mortgages are the lone exception. In 1978, Congress excepted principal-residence mortgages from bankruptcy. The stated reason was "to encourage the flow of capital into the home lending market."

Several bills now pending in Congress would repeal the principal-residence exception, authorizing the country's approximately 400 bankruptcy judges to begin sorting out the mortgage mess.

Financially distressed homeowners with mortgages under about $1 million could file for Chapter 13 bankruptcy. They would have to propose a plan to pay all their disposable income to mortgage and nonmortgage creditors for at least three years. As part of each homeowner's plan, he or she could get mortgage relief that included reduction of the mortgage balance to the current value of the house; reduction of the interest rate to current market rate; and, perhaps, more time in which to pay.

At minimum, however, each homeowner would pay the house's full value or the mortgage's full amount (whichever was lower) plus interest at the current market rate.

The Mortgage Bankers Association and the American Bankers Association are opposed. The MBA's president-elect testified to Congress that "[i]f this bill becomes law, we believe mortgage rates would jump significantly, going up 1 to 2 points for everyone taking out a loan." If true, that would be horrendous. But the MBA offers not a shred of evidence. A careful empirical study released in January by professor Adam J. Levitin of Georgetown University Law Center and co-author Joshua Goodman shows just the opposite. If interest rates rose at all, they would rise in an amount so small it would not even reduce the number of loans made.

Understandably, the bankers want to negotiate in an environment where they, not neutral bankruptcy judges, have the final say. But the Bush administration and the bankers have had their shot at the mortgage crisis. They announced many renegotiation schemes but accomplished few renegotiations. The bankers still don't have people in place with the knowledge, skills and incentives to deal with the crisis. The bankruptcy courts do. Congress should give the go-ahead.

• Lynn M. LoPucki teaches commercial law and bankruptcy at the UCLA and Harvard law schools.