I have an opportunity to buy a re-performing first note at a 40% discount to principal The note has only 2 payments under a recent loan modification The interest rate is 5% and the principal is about 10% above apprais...

That works.You're going to use both for productive investment use - that works.You may convert one of them to primary residence after two years ( not statutory holding period but two years is a safe harbor from Rev proc 2008-16) - that works.After you live in that property for the specified amount of time (right now it's two years but the tax reform bill may change that to 5 years)  you can sell it and take the first $250K of profit ($500K if married) tax free. 

Since Bill Clinton reformed welfare, the government simply shifted "welfare" to the SSDI program.

@Sara Kirkpatrick    thanks for your comment, yes, let us hope there is solace to be found in politicians being reasonable in any tax reform even if the motivations aren't said to be altruistic.  

Also need to find some umbrella insurance.As for Tort reform, the granny at McD deserved her money. 

Congressional tax reform bills.

Your interest expense is deductible as investment interest on Schedule A (itemized deductions), as long as it is not higher than the interest you're making.If you're not itemizing - the likelihood of which is much higher if the tax reform passes - then you're not getting the benefit of the interest you're paying.

You're discounting the very real possibility they could get low bono or pro bono representation through either the local legal aid society, who typically hates landlords, or a local chapter of the ACLU, if they are particularly sob-worthy people.But that is beside the point, as I think your recommendation for question reform is a good one.

[a] For example, where the parties to a contract make an oral agreement that, when reduced to a writing, is mis-transcribed, the aggrieved party is entitled to reformation so that the writing corresponds to the oral agreement.[1]

The 2008 BK reform laws have made it very tough on BK filers now so it might not be as easy as they think.BK attorneys generally provide a free consult to advise if it makes a wise decision or not.