Senate Banking Chairman Christopher J. Dodd said Wednesday that he plans to introduce legislation soon that would rewrite portions of the bankruptcy code.

His package will include provisions to change the treatment of mortgage debt to help struggling property owners hold on to their homes. A statement from the Connecticut Democrat said the measure also would “seek to undo the most pernicious aspects of the recent bankruptcy legislation that was passed in 2005.”

The proposal would allow judges to consider debtors’ “individual circumstances” in determining their ability to pay off their debts. It also would ensure that medical debts can always be discharged in bankruptcy.

Dodd, a candidate for his party’s presidential nomination, said in a statement that he had opposed the 2005 law, which made it harder for consumers to wipe out their debts and gain a fresh start by filing for bankruptcy protection.

“Most often, individuals are forced into bankruptcy by a devastating medical event or the loss of a job,” Dodd said. “Our bankruptcy laws should not punish these vulnerable members of our society.”

In response to problems in the subprime mortgage market, Dodd’s proposal, like those introduced by other lawmakers in both chambers, would allow bankruptcy courts to modify the terms of home mortgages during bankruptcy proceedings, something prohibited under current law.

Hundreds of thousands of homeowners are threatened with foreclosure, as their adjustable rate mortgages reset to higher monthly payments from an initial low teaser rate.

According to the Center for Responsible Lending, changing the law to allow bankruptcy courts to modify mortgages in this way could allow as many as 600,000 people to stay in their homes over the next two years.

The lending industry strongly opposes the proposed change, arguing it could end up raising lending costs and further damaging an already weakened housing market.