The ocean between you and your creditors does not close the courthouse door. It also does not close the collections door. That is why tens of thousands of Americans overseas are still getting sued, garnished, and hounded over debt they left behind in the States.

Filing bankruptcy while living abroad works, but it comes with traps that a stateside filer never has to think about. Here is what you actually need to know.

Who is eligible to file bankruptcy from outside the United States?

The Bankruptcy Code does not care about your zip code. It cares about a single sentence.

Section 109(a) of Title 11 says that “only a person that resides or has a domicile, a place of business, or property in the United States, or a municipality, may be a debtor under this title.” Read that list again. Residence, domicile, business, or property. Any one of the four will do.

There is no citizenship requirement. There is no residency requirement. A U.S. citizen who has lived in Portugal for a decade qualifies.

So does a green card holder who went home to India. So does a foreign national who never lived here but has a bank account in Manhattan.

For most expats, the hook is “property in the United States.” And the courts have been remarkably generous about how little property counts.

How much U.S. property do you need?

Almost none.

The leading case is In re McTague, 198 B.R. 428 (Bankr. W.D.N.Y. 1996). The debtor was a U.S. citizen who had lived in Ontario for eleven years. Her only asset on this side of the border was a checking account in Buffalo with $194 in it.

She owed about $17,000 in U.S. credit card debt. The court held that Section 109(a) sets no minimum and refused to dismiss the case.

A Delaware bankruptcy judge later put it this way in In re Global Ocean Carriers Ltd., 251 B.R. 31 (Bankr. D. Del. 2000): the court has no discretion to decide whether Congress meant to let someone file “solely on the basis of having a dollar, a dime or a peppercorn located in the United States.” A dime is enough. A retainer sitting in your bankruptcy lawyer’s trust account is enough.

The best case for an individual expat is In re Farmer, 288 B.R. 31 (Bankr. N.D.N.Y. 2002). The debtor was an American who had lived in the Bahamas since 1993. She owned roughly $300,000 of real estate in Nassau and owed about $74,000 on U.S. credit cards.

Her only U.S. assets were two small bank accounts in upstate New York holding about $600. The court found her eligible, found venue proper, and denied the U.S. Trustee’s motion to dismiss.

That said, eligible is not the same as safe. Keep reading.

Can the court throw out your case anyway?

Yes, and this is the part expats get wrong.

Section 109(a) is a low bar. But a bankruptcy judge has other tools: dismissal for cause under Section 707(a), abstention under Section 305(a), and in Chapter 13, dismissal under Section 1307(c). Courts use those tools when a debtor manufactures a U.S. connection at the last minute.

In re Yukos Oil Co., 321 B.R. 396 (Bankr. S.D. Tex. 2005), is the cautionary tale. The Russian oil giant wired $480,000 into a Texas account opened hours before filing. The court agreed the company was technically eligible, then dismissed the case because the money “was transferred to the United States for the purpose of creating jurisdiction less than one week before the petition date.”

A Delaware court did the same thing to the Bahamian Baha Mar resort entities in In re Northshore Mainland Services, Inc., 537 B.R. 192 (Bankr. D. Del. 2015), abstaining on comity grounds even though the debtors were eligible.

Even in McTague, the judge went out of his way to note that the debtor had liquidated a $6,000 retirement account and run up debt shortly before filing, and invited the trustee to move for dismissal on those facts.

The lesson is simple. Do not open a U.S. bank account the week before you file. Do not wire money to a cousin in Bethesda so you can list it on your schedules.

Use the accounts, retirement plans, and creditor relationships you already have, and be ready to show they have been there for months or years.

Where do you file when you don’t live anywhere in the United States?

Venue is a separate question from eligibility, and expats trip over it constantly.

Under 28 U.S.C. Section 1408, you file in the district where your domicile, residence, principal place of business in the United States, or principal assets in the United States have been located for the greater part of the 180 days before filing. Note the phrase “in the United States.” Your house in Costa Rica does not count. Your $2,000 savings account at Navy Federal does.

That gives an expat two paths.

Path one is domicile. Domicile is where you live with the intent to remain, and you keep your old domicile until you establish a new one. If you took a three-year posting in Frankfurt and plan to come back to Arlington, you can argue your Virginia domicile never left. If you sold everything and retired to Chiang Mai for good, that argument is gone.

Path two is principal assets. In Farmer, the court held that the debtor’s two small New York bank accounts were her “principal assets in the United States,” so venue was proper in New York even though she spent two or three weeks a year there. Her Bahamian real estate was irrelevant to the venue statute. That is the path most expats end up using.

For the DC region, that means the District of Columbia if your largest U.S. asset sits in the District, the District of Maryland (Greenbelt or Baltimore) if it sits in Montgomery or Prince George’s County, and the Eastern District of Virginia in Alexandria if it sits in Fairfax or Arlington. The asset should have been there for at least 91 of the 180 days before you file. Plan accordingly.

Why would anyone living abroad bother filing in the United States?

Because the debt does not take a break because you moved.

American creditors have long memories and cheap lawyers. A credit card company can sue you in DC Superior Court or Fairfax Circuit Court while you are in Dubai, get a default judgment, and sit on it.

In the District, D.C. Code Section 12-303 stops the statute of limitations from running while a resident defendant is out of the District. Maryland has a similar rule at Courts and Judicial Proceedings Section 5-205. Your absence does not run out the clock. It freezes it.

Here are the reasons expats actually call me.

You plan to come home. The judgment, the credit report, and the collectors will all be waiting at the arrivals gate. A discharge clears the runway before you land.

You still have U.S. assets. A judgment creditor can garnish a U.S. bank account, levy on U.S. real estate, and attach an inheritance that comes through a U.S. probate court. Your foreign paycheck is out of reach. Your Chase account is not.

You owe the IRS. The IRS can certify a “seriously delinquent tax debt” to the State Department, which can then deny or revoke your passport under 26 U.S.C. Section 7345. For 2026 the threshold is $66,000. For an expat, a revoked passport is not an inconvenience. It is a crisis.

The IRS will not certify a taxpayer who is in bankruptcy, and it will reverse an existing certification once you file, though not overnight.

Someone co-signed for you. Your mother in Silver Spring is still on the hook for the car loan you stopped paying from Seoul. Chapter 13 protects co-signers on consumer debts through the co-debtor stay in Section 1301. Chapter 7 does not.

You want a clean record. A U.S. bankruptcy stays on your U.S. credit report for up to ten years. A string of charge-offs and collections stays for seven years from the original default, and selling the debt to a collector does not restart it. A discharge sets one date and lets the clock actually run.

What are the reasons not to file bankruptcy while living abroad?

Here is the part the expat forums leave out.

Your foreign creditors may not be bound. A U.S. discharge is an injunction issued by a U.S. court against creditors over whom that court has jurisdiction. A bank in London that never did business with you here, never filed a claim, and never received notice may simply ignore it.

England is the clearest example. Under the rule in Antony Gibbs and Sons v. La Societe Industrielle et Commerciale des Metaux (1890) 25 QBD 399, reaffirmed by the Court of Appeal in Bakhshiyeva v. Sberbank of Russia [2018] EWCA Civ 2802, a foreign bankruptcy does not discharge a debt governed by English law unless the creditor submitted to that proceeding. Your Barclays overdraft survives your Chapter 7, at least in England.

Canadian courts are more flexible and will often recognize a U.S. case on comity grounds, but recognition is discretionary. The European Union leaves it to each member state.

The flip side matters too. A foreign creditor that files a proof of claim in your U.S. case submits to the court and is bound. In In re Avianca Holdings S.A. (Bankr. S.D.N.Y. Jan. 27, 2023), Judge Glenn held foreign plaintiffs in contempt for pursuing lawsuits abroad after they had filed claims in the U.S. case.

Your foreign assets are on the table. Section 541(a) sweeps into the bankruptcy estate all your property “wherever located and by whomever held.” Your flat in Valencia, your Australian superannuation, and your account at Deutsche Bank are all property of the estate.

A Chapter 7 trustee cannot fly to Spain and change the locks. But the trustee can order you to sell the flat and turn over the proceeds, and you are personally subject to the court’s jurisdiction. Refuse, and you lose your discharge under Section 727(a)(6).

Hide the asset, and it gets worse. In In re Urbonas (Bankr. N.D. Ill. Sept. 30, 2015), the debtor left a Lithuanian bank account holding about $2,500 and a Lithuanian pension of about $207 a month off his schedules. The court denied his discharge entirely under Sections 727(a)(2) and (a)(4).

Two thousand five hundred dollars. In 2024, a Texas couple who concealed properties and bank accounts in Dubai and Pakistan waived their discharge after the U.S. Trustee sued them.

Your foreign pension is probably not exempt. The retirement exemptions in Sections 522(b)(3)(C) and 522(d)(12) protect only accounts that are tax-exempt under specific sections of the Internal Revenue Code. A Canadian RRSP, a UK pension, and an Australian super fund are not on that list.

In Green v. Leibowitz (N.D. Ill. 2023), affirmed by the Seventh Circuit in 2024, a debtor lost about $72,000 in Canadian retirement funds because the plan was not “created or organized in the United States.” A 401(k) from your old job at Booz Allen is fully protected. Your foreign equivalent usually is not.

The paperwork is heavier. You will disclose every foreign account, and the trustee will compare your schedules against your FBAR and Form 8938 filings. If you have been skipping those, expect questions.

What exemptions can an expat use?

This is where living abroad can actually help you, especially if your last U.S. address was in the District.

Exemptions are the property you keep. Section 522(b)(3)(A) says you use the exemption law of the state where you were domiciled for the 730 days before filing. If you were not domiciled in one state for that whole period, you look back to where you lived for the 180 days before that two-year window.

A foreign country is not a “state” under the Code. So if you have been in Singapore for three years, you get pushed back to wherever you lived before you left.

And if you have been gone long enough that no state fits, or your old state limits its exemptions to current residents, a special clause at the end of Section 522(b)(3) kicks in and lets you use the federal exemptions in Section 522(d). One court called that clause a provision that “no one other than people who had been domiciled in foreign countries would need.” In re Long, 470 B.R. 186, 190 (D. Kan. 2012).

The Fourth Circuit, which covers Maryland and Virginia, decided how this works in Sheehan v. Ash, 889 F.3d 171 (4th Cir. 2018). You look at the old state’s exemption statute and ask whether it limits itself to residents or in-state property. If it does, the exemption is gone, and the federal fallback opens up.

For the DC region, that plays out three ways.

Virginia limits its exemptions to a “householder,” defined in Va. Code Section 34-1 as a resident of Virginia. Move to Berlin, and you are no longer a householder. The federal exemptions become available.

Maryland is messier. The $5,000 wildcard and the homestead exemption in Courts and Judicial Proceedings Section 11-504(f) are limited to a debtor “domiciled in this State,” but other Maryland exemptions have no domicile language. Expect a fight.

The District of Columbia never opted out of the federal exemptions. If DC is your lookback state, you get to choose between DC exemptions and federal exemptions, no fight required.

For cases filed through March 31, 2028, the federal exemptions protect $31,575 of home equity, $5,025 in a vehicle, and a wildcard of $1,675 plus up to $15,800 of unused homestead. That wildcard is what makes the federal scheme so useful for an expat with no U.S. house but a few U.S. accounts to protect.

Does foreign income count on the means test?

Every dollar, euro, and dirham.

Current monthly income under Section 101(10A) is your average income “from all sources” over the six months before filing. Your salary from a Dutch employer counts even though the IRS lets you exclude most of it on Form 2555. The means test is not a tax concept.

Convert the income to dollars at the exchange rate for each month and report it.

Two open questions follow. First, the means test compares your income to the median for “the state in which you live.” There is no median family income table for Thailand. Most practitioners use the median for the state where the case is filed, and I disclose that choice on the form.

Second, the IRS living expense standards that drive the second half of the means test have no foreign locality. If your rent in Tokyo runs twice what the Fairfax County standard allows, you may have to argue it as a special circumstance under Section 707(b)(2)(B). It can be done. Bring receipts.

Can you do Chapter 13 from overseas?

Yes, if your income is stable.

Chapter 13 requires “regular income,” which Section 101(30) defines as income stable enough to fund a plan. Nothing says it has to be earned in the United States. A steady foreign paycheck or a pension qualifies. Freelance income paid in three currencies from clients on two continents is a harder sell.

You also have to fit under the debt limits. For cases filed after April 1, 2025, that means less than $526,700 in unsecured debt and less than $1,580,125 in secured debt.

And you have to make a plan payment to a trustee in Greenbelt, Alexandria, or DC every month for three to five years from wherever you are. Set up the U.S. account and the automatic transfer before you file, not after.

Do you have to come back for court?

Almost never.

Every district in the country now runs the Chapter 7 and Chapter 13 Section 341 meeting of creditors, the one hearing every debtor attends, by Zoom. You will send your photo ID and proof of Social Security number to the trustee ahead of the meeting. A U.S. passport works. Then you log in from your kitchen in Prague and answer questions under oath for ten minutes.

The U.S. Trustee reserves the right to require any debtor to appear in person. That is rare for a debtor who has been candid and organized. Time zones are the real problem. A 10:00 a.m. meeting in Alexandria is 1:00 a.m. in Manila.

You can complete the credit counseling course required by Section 109(h) online or by phone through any approved agency. There is no exception for living abroad, and none is needed.

When should you file?

Before the U.S. asset you need for venue disappears, and before a creditor reaches it.

The timing pieces stack up like this. Your U.S. account or retainer needs to sit in the filing district for the greater part of 180 days. Your income over the prior six months sets the means test.

Your tax returns need to be current: Section 521(e)(2) requires your most recent federal return, and Section 1308 requires the last four years in a Chapter 13. Expats get an automatic extension to June 15, but an unfiled return is an unfiled return, and the trustee can hold your meeting open until you produce it.

If a passport certification letter has already arrived from the IRS, the calculus changes. Call me before the State Department acts.

What does a bankruptcy from abroad actually look like?

Here is the pattern that works.

You keep the U.S. accounts you already have and stop moving money around. You gather three years of foreign bank statements, your FBAR filings, your lease or deed abroad, and your foreign pay records. You convert everything to dollars and disclose all of it, down to the pension you can’t touch until 2040.

You file in the district where your principal U.S. asset has been sitting. You attend the 341 by Zoom and get your discharge four months later.

Your U.S. creditors are done. Your foreign creditors are a separate conversation, and I’ll tell you before you file which ones the discharge is likely to reach.

Expat bankruptcy FAQ

Can I file Chapter 7 if I live outside the United States permanently?

Yes. Section 109(a) requires only that you have property in the United States. A bank account you have kept for years is enough. Where you sleep does not matter.

Can I file bankruptcy with no U.S. address at all?

Yes. You list your foreign address on the petition. Venue runs off where your U.S. assets sit, not where you live.

Do I have to come back to the United States for my case?

Almost never. The 341 meeting is by Zoom, the credit counseling course is online, and I handle the filing. The U.S. Trustee can require an in-person appearance, but that is rare.

Can I keep my foreign bank accounts and property?

You keep whatever your exemptions cover, and everything you own is disclosed. Foreign accounts are property of the estate. Hiding one costs you the discharge.

Does my foreign salary count on the means test?

Every dollar of it, converted at the monthly exchange rate. The foreign earned income exclusion is a tax rule, not a bankruptcy rule.

Talk to someone who has filed these cases

I handle these cases from my office on Connecticut Avenue, and I know the local rules in the District of Columbia, the District of Maryland, and the Eastern District of Virginia. I’ll run the numbers with you, tell you which court fits, and tell you plainly if a U.S. filing is not worth it from where you sit.

The consultation is free, confidential, and by phone or video from anywhere. Call (202) 448-5136 or reach me through lee-legal.com.

Don’t wait for the judgment to find you.

Federal employees and contractors across DC, Maryland and Northern Virginia are facing sudden income disruption: reductions in force, furloughs, administrative leave, lost contracts. The debt does not take a break because the paycheck did. The mortgage company is not waiting.

If you are trying to figure out your options, you are in the right place.

When the bills do not stop just because the paycheck did

A household built around a GS-12 salary, or a government contracting income, carries real obligations. A mortgage in Fairfax or Montgomery County. Car payments, student loans, credit cards that started covering the gaps.

Losing the income does not erase those obligations. It puts you under pressure to solve them.

I have worked with federal employees and contractors in this situation for years. I know what the options look like, and I will tell you which ones make sense for you.

What I can help with

Chapter 7 bankruptcy. Wipes out credit cards, medical bills and personal loans, usually in three to six months. A genuine fresh start.

Chapter 13 to save your home. Stops foreclosure, catches up the missed mortgage payments over three to five years, and keeps you in the house. The right tool if you have steady or returning income.

Wage garnishment defense. The automatic stay takes effect the moment you file and stops garnishments. Call me before your next paycheck is touched.

Security clearance guidance. Cleared employees need a lawyer who understands how the adjudicative guidelines treat debt. I have handled this intersection many times.

Government contractor cases. Lost a contract or task order? Contractor cases have their own income documentation issues and means test questions. I know the landscape.

A free consultation. Not sure bankruptcy is right for you? I will go through every option with you at no charge.

Can a federal employee file for bankruptcy?

Yes. Federal employees have the same right to file as anyone else, and filing does not by itself affect your employment status. If you hold a clearance, the filing may be reviewed at your next adjudication, and the next section covers how that works.

Will bankruptcy hurt my security clearance?

This is the first question cleared employees ask. Unresolved debt is a bigger threat to your clearance than bankruptcy.

The adjudicative guidelines treat unpaid judgments, wage garnishments and ignored lawsuits as red flags. They treat financial trouble caused by events outside your control, such as a layoff, as a mitigating factor, especially when you have acted responsibly to address it. A bankruptcy filing is a documented, lawful resolution of the debt.

I have written more about how foreclosure and debt affect a security clearance. Short version: taking action beats letting the pile grow.

I am a government contractor who lost my contract. Is my situation different?

Yes, and it matters. Contractors often face a harder landing: no severance, no retirement match to fall back on, fewer protections.

The bankruptcy process also treats contractors differently, especially around income documentation and the means test. Whether you are a 1099 contractor, a W-2 employee of a firm that lost its award, or a small business owner who held the contract, I have handled your situation before.

What is the difference between Chapter 7 and Chapter 13?

Chapter 7 eliminates most unsecured debt, meaning credit cards, medical bills and personal loans, and closes in three to six months. Chapter 13 sets up a three to five year repayment plan and is the tool for stopping foreclosure and keeping your home.

If your income dropped recently, you may now qualify for Chapter 7 even if you did not before. The means test looks at the six months before you file. I will run the numbers with you.

Can I stop a wage garnishment or creditor lawsuit after a layoff?

Yes, and fast. The automatic stay takes effect the moment you file. It halts garnishments, bank levies, collection lawsuits and foreclosure proceedings.

What if I am behind on my mortgage after losing my federal job?

File Chapter 13 before the foreclosure moves further. The automatic stay stops it, and the plan lets you catch up the missed payments over time while you stay in the house.

Virginia and Maryland foreclosure timelines are fast. Do not give the lender more runway. Here are the seven ways to stop a foreclosure sale, fastest first.

Are my FERS pension, CSRS annuity and TSP protected in bankruptcy?

Yes. Federal retirement benefits and the Thrift Savings Plan are protected by federal law, and you do not have to spend them down to deal with your debt. Most federal employees I work with do not know this going in.

What should I do during a furlough or shutdown?

A furlough is not a layoff, but the bills arrive on the same schedule.

Do not take on new debt to bridge the gap if you can avoid it. Call your mortgage servicer, landlord and lenders before a payment is missed, not after; most have hardship programs for federal workers during a shutdown, and several credit unions that serve federal employees offer low-interest or no-interest furlough loans.

Back pay usually arrives when the government reopens. The question is whether the damage done in the meantime, missed payments, late fees, a default notice, can be undone. If you were already stretched before the furlough, the furlough is often the moment to call me, not the aftermath.

What debts can bankruptcy eliminate?

Credit cards, medical bills, personal loans, payday loans, utility arrears, deficiency balances on repossessed vehicles, and some older tax debts. Student loans survive unless you win an undue hardship case, and that is more possible than it used to be. Child support and alimony are never discharged.

I will go through every debt you carry so you know exactly where you stand.

How long does the bankruptcy process take?

Chapter 7: three to six months from filing to discharge. Chapter 13: three to five years through a court-supervised plan. Either way, relief starts the day you file, because the automatic stay takes effect immediately.

Who I work with

Federal employees facing layoffs, RIFs or forced resignations. Cleared employees and contractors worried about clearance impact. GS, SES and wage grade employees with FERS or CSRS pensions.

Government contractors who lost contracts or task orders. Postal workers, VA employees, DoD civilians and IC personnel. Federal employees on administrative leave or LWOP.

Small business owners who relied on federal contracts. Federal workers facing foreclosure in Virginia, Maryland or DC. Spouses and family members of impacted federal workers.

I file in the U.S. Bankruptcy Courts for the District of Columbia, the District of Maryland and the Eastern District of Virginia, and I know each court’s local rules.

Your first step is a free conversation

You will talk directly with me, not a paralegal, not an intake form, not a chatbot. I will listen, explain your options in plain language, and give you an honest read on where you stand.

No pressure. No obligation. No fee.

Call (202) 448-5136. Evenings and weekends available, by phone, Zoom or in person in downtown DC.

A default judgment is the order a creditor gets when you don’t respond, and it is what opens the door to garnishing your wages and freezing your bank account. Hiring a lawyer early is how you keep it from happening.

What does a debt defense attorney actually do?

Answers the lawsuit. I make sure a response is on file before the deadline, so the creditor cannot win just because you didn’t show up.

Makes the creditor prove it. The plaintiff has to show that it owns the debt, that the amount is right and that it sued in time. A debt buyer, a company that buys old accounts from the original lender, often cannot produce the contract or the paperwork showing the account was sold to it.

Raises your defenses. Common defenses include the statute of limitations, the deadline for suing on a debt, and fees or interest the contract never allowed.

Brings counterclaims. If the collector broke the Fair Debt Collection Practices Act, the federal law that limits how collectors can treat you, you may have a counterclaim, a claim of your own against them in the same case. That can shift the leverage quickly.

Negotiates the settlement. Many collection cases settle, and a lawyer can often get a lump sum or payment plan for less than the balance, ideally with a dismissal instead of a judgment. How to settle a debt if you get sued walks through how that usually works.

Goes to trial when needed. If the plaintiff won’t make a reasonable offer, I take the case to a hearing. Being ready to try the case is part of what makes a fair settlement possible.

When do I need a debt defense attorney?

You’ve been served with a complaint or a warrant in debt. A complaint is the lawsuit paper filed in DC Superior Court, and a warrant in debt is what a Virginia General District Court calls a debt lawsuit. Either way, your time to respond started when you were served, and Virginia warrant in debt cases have their own rules.

Garnishment is threatened. If a collector says it will garnish your wages, it either already has a judgment or is about to ask for one. Find out which right away.

The plaintiff is a debt buyer. If the name on the lawsuit isn’t the company you borrowed from, someone bought your account. Those cases often have proof problems a lawyer can use.

A collector has broken the rules. Threats, lies about the amount, calls to your job after you asked them to stop, or a lawsuit on a debt that is too old. Write down what happened and bring it.

Can’t I just handle it myself?

You can, but the rules are technical and the plaintiff’s lawyer files these cases every week. Why you should not defend yourself in a debt collection lawsuit covers the mistakes people most often make on their own.

What should I look for in a debt defense attorney?

Consumer collection defense in your court. Ask whether the lawyer regularly defends collection cases in the court where you were sued. Local practice matters: how the judges run these dockets, what the plaintiff’s firms will usually accept, and how quickly cases move.

A fee quoted up front, in writing. You should know before you sign what the representation costs and what it covers.

Honesty about bankruptcy. If you’re facing several lawsuits, defending one may only delay the next judgment. A lawyer who also handles bankruptcy can tell you when it is the better tool, and when it isn’t.

A clear read on your case. You want someone who tells you what your defenses are really worth.

What should I bring to the consultation?

• The summons and complaint or warrant in debt, every page.
• Every letter from the plaintiff, the collector or the plaintiff’s law firm.
• Old statements from the original creditor, if you have them.
• Notes on collection calls: dates, names and what was said.
• Any notice of a court date or hearing.
• Your recent pay stubs and a list of your other debts.

The last item matters because I need the whole picture, not only this one lawsuit.

How do debt defense fees usually work?

I quote my fee after I have read the court papers, and I put it in writing. What it costs depends on the court, how far the case is likely to go and whether there is a counterclaim worth bringing.

When a collector has violated the Fair Debt Collection Practices Act, the law can make it pay your attorney’s fees. I check every case for that.

Compare the fee to the cost of doing nothing. A default judgment is usually the full balance plus interest and court costs, and often the plaintiff’s attorney’s fees if the contract allows them, collected from your paycheck or bank account.

When is bankruptcy the better answer?

If this lawsuit is one of several, or your debts are more than you could repay in a few years, fighting each case separately can cost more than it saves. Chapter 7 or Chapter 13 bankruptcy stops every lawsuit at once through the automatic stay, a court order that halts collection the moment you file.

Bankruptcy isn’t the default answer. A single lawsuit on a debt you can settle is usually better handled as a lawsuit.

What should I do right now?

If you’ve been served, call me at (202) 448-5136. Have the court papers in front of you so I can tell you your deadline.

The consultation is free. I will tell you whether you have defenses, whether settlement makes sense, and whether bankruptcy would serve you better.

I defend collection lawsuits in DC Superior Court and Virginia’s General District Courts, and I handle bankruptcy in DC, Maryland and the Eastern District of Virginia. Don’t wait. Your deadline to respond is already running.

Here is how to handle the call, what the collector is not allowed to do, how to tell a real collector from a scam, and how to make the calls stop for good.

What should I do when a debt collector calls?

Stay calm. It is two people on a phone, and the line is recorded. Do not admit anything, do not promise anything, and do not argue.

Write down the caller’s name, the company, the phone number, the date and the time. Ask what debt they are calling about and who the original creditor was. Then tell them you want the details in writing and end the call.

You are not obligated to explain yourself, negotiate on the spot, or give them your bank information. If you were caught off guard, it is fine to say you will call back.

Do I have to prove the debt is mine?

No. The collector has to show it is yours.

Within five days of first contacting you, a debt collector has to send a written validation notice: the amount, the creditor, and your right to dispute. If you dispute the debt in writing within 30 days, the collector has to stop collecting until it sends you verification.

Use that. Collectors work from purchased files that are often wrong about the amount, the interest, or whose debt it is. Make them prove it before you pay a dollar.

What is a debt collector not allowed to do?

The Fair Debt Collection Practices Act applies to third-party collectors, meaning agencies and debt buyers, not the original creditor. Under it, a collector cannot:

• Call before 8 a.m. or after 9 p.m., or at a time it knows is inconvenient for you.
• Call you repeatedly to harass you. Federal rules now presume that more than seven calls in seven days about one debt is harassment.
• Call you at work after you tell them your employer does not allow it.
• Use profanity, threaten you, or threaten arrest or criminal charges.
• Lie about the amount, the creditor, or what will happen if you do not pay.
• Add interest or fees the contract does not allow.
• Contact you at all once you tell them in writing to stop, except to confirm it will stop or to tell you it is taking a specific action such as filing suit.
• Contact you directly once it knows you have a lawyer.

A collector that breaks these rules can owe you damages and your attorney’s fees. Keep your call log.

How do I tell a real collector from a scam?

Scam collection calls follow a pattern. The caller uses official-sounding words with no meaning: “compliance officer,” “the filing party,” “the district office.”

There is a deadline measured in “business hours,” a threat to show up at your home or workplace, and a closing line like “you have been officially notified.”

Real collectors identify the company and the creditor and send the written notice described above. Real legal process does not arrive by voicemail with a callback number.

If you get a call like that, do not call back and do not pay. Look up the company independently, and if the debt is real, deal with the actual creditor in writing.

Should I tell them my story?

Briefly, once. You are not paying because you cannot, not because you will not. That is all they need.

The problem is that tomorrow you get a different agent, and the story starts over. Telling it does not make the debt go away, and a cease-contact letter does not either. The collector can still sue, and a judgment can lead to garnishment.

Stopping the calls and solving the debt are different problems. Solve the second one and the first one solves itself.

What happens when I hire a lawyer?

The calls come to me instead.

Once a collector knows you are represented, the law requires it to contact your lawyer, not you. I verify and dispute the debt if there is a reason to, check the collector’s compliance, and if the debt is valid, negotiate a settlement that usually costs less than the balance. If the collector keeps calling you anyway, that is a violation I can use.

If you have decided to file bankruptcy, I take your creditor calls in the weeks before filing, so you can focus on getting the case ready instead of answering the phone.

When do the calls stop for good?

The day a bankruptcy case is filed. The automatic stay takes effect immediately and bars every creditor from calling, writing, suing or garnishing.

Creditors who keep collecting after the filing face sanctions and attorney’s fees, and most stop the moment they learn the case number. If you are getting calls from several collectors at once, that is usually the sign that the debt problem is bigger than any one call, and a bankruptcy consultation is the right next step.

What should I do right now?

If one collector is harassing you, keep the log and call me. You may have a claim against them.

If several collectors are calling, call me at (202) 448-5136 for a free consultation. I will take the calls, and I will tell you whether settlement or bankruptcy is the way to make them stop.

I handle debt defense in DC and Northern Virginia, and bankruptcy in DC, Maryland and Northern Virginia. Don’t let a single collector throw off your whole financial picture.

Top 4 Credit Killers

1. Serious delinquency. Old accounts that have been on your credit report for a long time are the number one credit killer. Credit bureaus will assume (algorithmically) that you do not care enough about your credit to fix small problems. A three-year-old $75 LabCorp debt can drag your credit down by 100 points or more. This is why it’s important to routinely monitor your credit report and promptly address credit items.
2. Recent missed payments. Everyone misses a payment at some point. You may have been on vacation, or you may have changed card numbers and auto-bill didn’t transfer correctly. But realize that recently-missed payments count more against you than old missed payments. Avoid them if you can. If you do miss a payment, bring it current immediately. And in the future, if you are unsure whether you’re going to be able to make a payment, contact the lender. See if there’s some sort of forbearance they can offer. Try to get them to delay credit reporting for 30 to 60 days.
3. Bad payment history. Fixing a bad payment history is a two-step process. First, you must fix the items on your credit report in which you missed payments. Either get back on track by making at least three months of timely payments, or just pay the account off completely. Second, you must replace that bad history with good history. This means adding a newer credit account to replace that old account. Of course, you must stay current on new accounts, as well, for this technique to work.
4. High credit usage. The availability of credit can account for as much as 30 percent of your overall score. The trick here is to obtain — but not necessarily to use — as much credit as possible. Having credit in reserve is considered a positive attribute by the credit bureaus. If all of your credit is maxed out — not so much.

Wipe the slate clean

If you have multiple credit killers on your credit report, consider getting a fresh start with bankruptcy. Although a bankruptcy filing will definitely impact your credit, it also eliminates your debts and addresses all the credit killers on your credit report. If you have many creditors or deep debt, discuss your bankruptcy options with an experienced attorney.

The deadly and highly contagious coronavirus has shut down our economy. Since March 2020, tens of thousands of Americans have died, and tens of millions of Americans have lost their jobs. With stay-home orders in place, America has put on its sweatpants. Recession is upon us.

The woe is not limited to the United States. The International Monetary Fund says that the world economy in 2020 will suffer its worst year since the Great Depression of the 1930s. For the first time in our lifetimes, an actual depression is possible, but fortunately we’re not there yet.

There are steps you can take to prepare for economic hard times. Here’s how to manage your personal finances during a recession.

Assess your situation

First and foremost, gauge your circumstances. If you haven’t already done so, create a budget. Identify all potential strengths and weaknesses in your incoming revenue streams and outgoing expenditures. Gather together statements for all of your savings and investment accounts. Calculate your available credit, which are your credit limits minus your balances. Run your credit report now so you have a baseline by which to compare your efforts later. Keep all of this information together.

Preserve your income

Goldman Sachs expects unemployment to soar to 15 percent by mid-2020, while JPMorgan forecasts 20 percent. These figures are unprecedented in American history in both their depth and scope. During the Great Recession, the U.S. unemployment rate hit just 10 percent for one month in October 2010.

Become as invaluable as you can to your employer. Vulnerable targets during a downsizing are those employees who consistently take too much leave from work; who contribute the least; who have the highest salaries; and who lack the latest industry-specific skills. Compare yourself to your colleagues and see how you stack up. Do what you can to shore up your value to the organization.

That being said, most people do not remain with the same employer for their entire careers. Maintain and update your resume. Network with contacts and colleagues relentlessly. Upgrade your professional skill set through classes and research. Be open to learning new aspects of your industry, or even an entirely different industry.

While you are still employed, increase your take-home income by lowering retirement contributions or reducing tax deductions. Free up as much income as possible when times are tight. Consider taking on a side hustle if you have the free time.

Trim your expenses

Carefully and objectively scrutinize every budget line of your spending. You control where your money goes. Make some changes to see how it affects your bottom line. List your expenses in descending order from the most important to the least. Prioritize the necessities and prune the niceties. Cut the cord. Take a staycation. Keep your head down and pay your bills. Managing personal finances during a recession can be seen as a chore or as an opportunity.

Rethink your investments

If you are more than 10 years away from retirement age, sometimes the best course of action is to do nothing. Staying put is better than panicking, selling, and locking in short-term losses. Try not to monitor your investments too closely. Remember that investing for retirement is a long-term proposition. Look away until markets recover.

If you are 10 years or fewer away from retirement age, seek advice about shifting allocations to lower-risk investments. Typical short-term strategies involve fewer stocks and more bonds, which better weather prolonged market drops like those typical during recessions.

A rule of thumb for investing during a recession: Rebalance but don’t withdraw. Avoid overreacting to market declines during periods of unusual volatility. If you can, continue to invest during sustained stock market declines because that’s the essence of investing. You’re buying low now to sell high later.

Scrupulously save

Growing a savings account is important to maintaining your personal finances in a recession. Saving during tough times can seem difficult. Yet it’s not only possible; it’s essential. You will inevitably encounter a true emergency. You’ll need that cushion.

Unfortunately, during a recession, savings sufficient to cover three to six months of expenses (the normal rule of thumb) may simply not be enough. The ability to withstand protracted financial hardship often depends largely on whether or not you’ve saved enough. Try to boost your savings until you have between six and twelve months of expenses.

Saving requires discipline. Stick to your budget and don’t touch your savings unless you absolutely must.

Don’t count on help

In time of crisis, you must be your own best friend. Don’t expect to count on anyone else for help. Don’t count on the government or friends or even family. A recession impacts every facet of every institution, and no one fully escapes the ensuing economic ravage. Your plight is not unique.

No one knows how long this recession will last, or whether it will be short and shallow or long and deep. Don’t count on anyone for a bailout. You’re on your own. Look after yourself. Get up, make your bed, and get to work. Indulge neither ruthlessness nor apathy. Instead, practice and actively cultivate self-reliance.

Scramble but don’t panic

Your mental outlook is determinative to positive outcomes. Sometimes it can be easy to lose your focus on the future when you’re making decisions on the fly. Being forced to make tough choices rapidly doesn’t mean that those choices can’t be smart.

Is a mental health crisis looming? Maybe, but that doesn’t mean you need to become a statistic. Don’t lose your cool. Maintain an optimistic, realistic state of mind. Scramble if you must, but don’t panic. You must stay focused while adapting your personal finances to a recession economy. Hustle, but make smart decisions.

Shed your debt

Minneapolis Federal Reserve President Neel Kashkari predicts the path to economic recovery from the coronavirus pandemic will be a long, hard road. If you are in excellent financial health and your income is secure, then you will be able to weather this recession.

On the other hand, if your income is variable (or nonexistent) and existing debt is your problem then consider filing bankruptcy can help you get a clean slate.

Just as important is learning how to save. A 2018 survey from Northwestern Mutual found that 46 percent of Americans have not taken any steps to prepare for outliving their savings. An additional 21 percent have nothing saved at all.

How to save when your net income is meager

How can you save today while still covering your bills? Here are some ways to feed your piggy bank without falling behind:

• Build your budget. Take the time to calculate what’s coming into your wallet and separate the “needs” from the “wants.” Drafting a budget — on paper, computer or through an app — puts all your numbers in one place and helps making financial decisions easier.
• Look at where your money is going. What can you cut from your lifestyle? Perhaps limit dining out or live without your HBO or Netflix subscriptions or making coffee at home instead of going to Starbucks. Making small, simple lifestyle tweaks can add up quickly.
• Clip those coupons and gain reward points. Shop for deals — whether online or in stores. Sign up for reward points from stores, hotels or any place that you frequent to get money back. Make sure that your credit cards are rewarding you for being their customer by researching credit cards that provide cash back and have no annual fees. The more you take advantage of the freebies out there, the more money you can put back in your savings.
• Keep a piggy bank (yes, really). It may sound silly, but keeping an actual, physical piggy bank (or a spare change jar) to deposit loose change can really add up.
• Negotiate your current subscriptions or bills. Call the companies you pay regularly — cable, auto insurance and phone — to ask what deals may be available to loyal customers. Don’t be afraid to shop around to find better rates that will save you cash.

Grow your disposable income

• Pay off or consolidate your debt. Student loans? Credit card bills that keep rolling over monthly? Work on a plan to consolidate your debt and pay it off. The monthly interest you’re paying is costing you in the end. Reach out directly to creditors or work with a consolidation expert.
• Refinance high-ticket items. Check in with your mortgage company to look for options that can re-finance your home and cut down on monthly payments.
• Consider a second job (aka side hustle). Are there things you love to do, that can give you a profit? Perhaps you are a task-driven person – companies like TaskRabbit pair “taskers” with people that need help. Consider hobbies that can generate additional money. Things that you love to do may become profitable through Etsy or other websites. Don’t limit yourself to your workday gig.
• Consider bankruptcy if you have too much debt. It can seem impossible to save if all of your income is going out the door each month to service debt. Wipe the slate clean and get a fresh start on your budget.

Feed your piggy bank!

No matter what tips you follow, remember this: You’re investing in the most important thing – your future. Decreasing your bills or increasing your income doesn’t mean you have more money to spend. Save that income instead, because you never know when you’re going to need it.

I have stopped foreclosure sales in DC, Maryland and Virginia for years, some with days to spare. Here are the seven options, fastest and surest first, and how the calendar runs in each jurisdiction.

1. File Chapter 13 bankruptcy

This is the only option on the list that does not need the lender’s permission.

The moment a bankruptcy petition is filed, the automatic stay under Section 362 of the Bankruptcy Code takes effect. The sale is cancelled by operation of law. It does not matter whether the lender agrees, and it does not matter whether the sale is tomorrow morning.

Chapter 13 then gives you three to five years to catch up the missed payments through a court-supervised plan while you keep making the regular payment. If you want to keep the house and can afford the mortgage going forward, this is how you do it. If you want to sell, Chapter 13 buys the time to list, market and close at a real price instead of an auction price.

One caution. If you had another bankruptcy case dismissed within the past year, the stay in a new case is limited unless the court extends it. Tell me about prior cases on the first call.

2. Reinstate the loan

Pay every missed payment, plus late fees, plus the lender’s foreclosure costs, in one lump sum, and the loan is back in good standing. Nothing is faster if you have the money.

Get the reinstatement quote in writing, good through a specific date, and pay by a method you can prove.

Once a sale is scheduled, the quote will include the lender’s attorney’s fees and advertising costs. Do not assume you can walk in the morning of the sale. Get the quote early and pay it early.

3. Pay off the loan

Refinance with another lender, sell the house, or bring cash. If the sale is weeks away and you have a buyer under contract, the lender will often postpone to let the sale close. If the sale is days away, a Chapter 13 filing protects the closing.

4. Get a loan modification

A modification lowers the payment and puts the arrears back into the loan. It is the right outcome for many homeowners. It is not a fast one.

Under federal servicing rules, a complete modification application received more than 37 days before the sale date stops the lender from holding the sale while the application is reviewed. Inside 37 days, that protection is gone. If you are reading this with a sale date next week, a modification alone will not save the house.

Many of my clients who got a modification got it after a Chapter 13 filing stopped the sale, not before. Here is why modifications get denied.

5. Ask for a postponement

Lenders do postpone sales, but only for a reason that benefits them: a signed contract of sale, a refinance commitment letter, a reinstatement wire in transit. A promise is not a reason. If you have documents that show the money is days away, send them to the foreclosure attorney, not the servicer’s call center, and get the postponement confirmed in writing.

6. Ask a court to stop it

If the lender has made serious errors, such as failing to send the required notices, foreclosing on a loan that is not in default, or proceeding while a complete loss mitigation application is pending, you can ask a judge to stop the sale.

These cases are expensive, and courts deny most of them. In DC, where most foreclosures run through Superior Court, the defense is usually raised inside the lender’s case. In Maryland, a homeowner can move to stay or dismiss the sale under Maryland Rule 14-211, but the deadlines are short and the grounds are narrow.

In Virginia, you would file a separate suit in circuit court. Do not try any of this without a lawyer.

7. Give the house back on your terms

A short sale or a deed in lieu of foreclosure does not stop the sale by itself, but a lender that has approved one will usually postpone the auction to let it close. Both can be negotiated to waive the deficiency. If the house is not worth keeping, this beats the courthouse steps.

How much time do I have?

It depends on the jurisdiction.

Washington, DC. Most residential foreclosures run through DC Superior Court, where the lender has to file a lawsuit and win a judgment before any sale. DC also allows a sale without a lawsuit, but only after a mediation step the lender must complete first, so either way you will know the sale is coming.

Maryland. The lender has to send a Notice of Intent to Foreclose at least 45 days before filing in circuit court, and the sale cannot happen until at least 45 days after you are served. You can request mediation after the filing.

After the auction, the court still has to ratify the sale, but do not count on that window. File before the auction.

Virginia. The fastest of the three. Virginia foreclosures are non-judicial. For a home you live in, the trustee has to mail you notice at least 60 days before the sale, plus a newspaper advertisement. There is no court filing and no mediation requirement.

Homeowners in Fairfax, Arlington and Prince William call me with a sale date a week out. Virginia is where the Chapter 13 option matters most.

What if I am a real estate agent with a seller in foreclosure?

The same rule applies to your listing. A Chapter 13 filing stops the sale and gives you the weeks you need to find a buyer and close.

I have worked with agents on exactly this. The seller files, the stay holds, the sale closes through the bankruptcy with court approval, and the seller walks away with equity instead of a deficiency.

When is it too late?

When the auctioneer finishes. A petition filed before the sale stops it. A petition filed after the sale does not.

I would rather file a week early than an hour early.

What should I do right now?

Find the sale date. It is on the notice you received or in the newspaper advertisement. Then call me at (202) 448-5136 with that date, your lender’s name and roughly how far behind you are.

I will tell you which of the seven options fits and how fast you have to move. I handle foreclosure defense in DC and Northern Virginia, and I file Chapter 13 for Maryland homeowners at the Greenbelt courthouse. The consultation is free.

Don’t wait. The sale date does not move on its own.

DC housing is expensive

Zillow tracks the median home value in Washington DC. As of today, a home at the median is valued at $628,914, while the median home price for all U.S. homes is $244,054. There’s a 62 percent premium for a home in the District. In 2019 in DC, we also saw a record for the median sales price at $459,950.

The median rent price in Washington is $2,730, compared to the national median rent of $1,650. There’s a 40 percent premium for renting in DC.

Washington DC’s cost of living is high

The District of Columbia is a generally expensive city. But DC’s average utility cost ($120) is lower than either Virginia ($170) or Maryland ($131).

Food in DC is more expensive, too, at an average of $15.20 a day versus the national average of $10.66. Gas is more expensive in the District, too, and the average annual cost of full vehicle insurance in the city is the 11th highest in the nation.

District residents pay a progressive tax that runs from 4 percent on the first $10,000 of taxable income to 8.95 percent on income of $350,001 and above. DC residents must also pay federal income taxes despite its lack of representation in Congress. DC’s sales tax rate is 6 percent.

Living in Washington DC is expensive

If you live in DC, you know how expensive it is to live here. If you’re having trouble keeping up with bills, consider hitting the reset button with a bankruptcy. Lee Legal has represented clients filing personal bankruptcy since 2004. We may be able to help you, too.

The psychological costs of servicing debt

Chronic indebtedness afflicts rich and poor nations alike. One in four families in the lowest income quintile in the United States spend more than 40 percent of household income on servicing their debts.

The mental costs are debilitating. The psychological costs of (or “debt mental-accounting costs”) exacerbate financial hardship because the repayment burdens divert resources from more productive uses.

In other words, the more time you spend thinking about debt reduces the amount of time you can think about other things, like saving, getting a better job, or budgeting more effectively.

The impact of chronic debt . . . is psychological, not just financial . . . [and] impairs psychological functioning and decision-making . . . This is because debt is . . . is viewed as costly mental accounts that consume cognitive bandwidth.

Reducing debt improves psychological functioning,
Qiyan Ong, Walter Theseira, Irene Ng

Servicing debt impairs your ability to make deliberative, economically rational choices. Previous studies have looked at this relationship, too. One study looked at the psychological effects of farmers before and after harvest. Another study examined urban poor people before and after payday.

Getting out of debt allows you to escape a debt trap

The longer you stay in debt, the more it may affect your financial choices. Over a long period of time, even full debt relief may not eliminate chronic stress because “debt scarring” may permanently alter your decision-making abilities. It’s better to act sooner, rather than later, once you fall behind. It’s better to declare bankruptcy, even, than to simply spin your wheels, going nowhere.

Getting out of debt could have a positive effect on future budgeting choices because it motivates people to alter behaviors.

We help people with debt problems

Since 2008, Lee Legal has assisted thousands of people seeking debt relief. If you are suffering psychological effects of debt, call our office and schedule a free consultation. We may be able to help you, too. Bankruptcy may be the best choice you can make for your mental health.

Congress created it in the Small Business Reorganization Act of 2019.

What makes Subchapter V different from a regular Chapter 11?

A trustee who helps, not one who runs the business. A Subchapter V trustee is appointed in every case to monitor it and help you and your creditors reach a plan. You stay in control of the business unless the court removes you for serious problems.

No creditors’ committee by default. In a traditional Chapter 11, a committee of unsecured creditors can hire its own lawyers, paid out of your case. In Subchapter V, there is no committee unless the court orders one.

Only you can propose a plan. Creditors cannot file a competing plan to take the business. You file your plan within a short deadline after the case starts.

Less paperwork. In most cases you don’t need a separate disclosure statement, the long document a traditional Chapter 11 requires before creditors vote.

Confirmation over objection. Creditors vote, but the plan can be confirmed even if they vote no. The court looks at whether the plan commits your projected disposable income for three to five years and whether it is fair and workable.

Who qualifies for Subchapter V?

You have to be engaged in business. That can be a corporation, an LLC, or an individual who owns and runs a business. A business whose only activity is owning a single piece of rental real estate generally doesn’t qualify.

Your debts have to fall under a limit. The debt limit has changed several times since Subchapter V took effect. I check the current figure for every case, because it decides whether this path is open.

Most of the debt has to come from the business. At least half of your debts must arise from business activities.

Why do owners like Subchapter V?

You keep the business and your ownership. In a traditional Chapter 11, owners often can’t keep their equity unless unsecured creditors are paid in full or the owners put in new money. Subchapter V drops that rule if the plan commits your disposable income.

It is faster. Without a committee, a disclosure statement or competing plans, there is less to fight about.

It is cheaper. Fewer professionals, fewer filings and no quarterly fees to the U.S. Trustee’s office, which a traditional Chapter 11 pays.

What does a Subchapter V plan look like?

Your plan lays out how each group of creditors gets paid. Secured creditors, like an equipment lender or a bank with a lien on your receivables, are paid at least the value of their collateral, often over time and sometimes at a new interest rate.

Unsecured creditors receive your projected disposable income, meaning what the business earns after the costs of running it and supporting you, for three to five years. The plan also has to show it can actually be done.

Individuals get some extra tools. If you file as an individual business owner, a mortgage on your home can sometimes be modified if the loan money went mainly into the business.

Once the plan is confirmed, or completed if creditors didn’t agree to it, you receive a discharge of the debts it covers.

What about my personal guarantees?

A business’s Subchapter V case does not wipe out your personal guarantee. A bank, landlord or equipment lender you personally guaranteed can still pursue you directly.

A plan that pays down the guaranteed debt reduces what you personally owe. But if the guarantees are larger than the business can repay, you may need your own case.

Your own case can be Subchapter V too. An individual engaged in business can file Subchapter V personally. Depending on the numbers, Chapter 13 or Chapter 7 may fit better.

What if the business is closing?

If the business is shutting down, Subchapter V usually isn’t the tool. An LLC or corporation doesn’t get a discharge in Chapter 7, so a closing business often doesn’t need its own bankruptcy at all.

The debt that matters is the debt that follows you: personal guarantees, credit cards used for the business, and any loans in your own name. A personal Chapter 7 or Chapter 13 handles those.

When most of your debt is business debt, you may not have to pass the means test, the income test for Chapter 7. That can open Chapter 7 to owners whose income would otherwise be too high.

What about EIDL and other SBA loans?

Many Economic Injury Disaster Loans, the pandemic-era SBA loans, came with a lien on business assets and a personal guarantee from the owner. Other SBA loans usually have guarantees too.

The guarantee follows the owner. Closing the business doesn’t end it. If the SBA refers the debt to the Treasury for collection, your tax refunds can be taken.

It can be discharged in your personal case. A personal guarantee on an SBA loan is generally treated like other unsecured debt in your own Chapter 7 or Chapter 13. The SBA’s lien on business assets is a separate question, and I look at both.

Where would my case be filed?

It depends on where the business or your home is: the U.S. Bankruptcy Court for the District of Columbia, the District of Maryland at the Greenbelt courthouse for Prince George’s and Montgomery counties, or the Eastern District of Virginia in Alexandria for Northern Virginia. Before you hire anyone, read how to choose a bankruptcy lawyer.

What should I do right now?

If your business is behind and you want to keep it, call me at (202) 448-5136. Bring your recent profit and loss statements, a list of business debts and any guarantees you signed.

The consultation is free. I will tell you whether Subchapter V fits, or whether a personal Chapter 7 or Chapter 13 makes more sense.

Don’t wait. A business has more options while it still has cash.

When you must file quickly

You must file your bankruptcy prior to a foreclosure auction or you will not be able to save the property. Filing bankruptcy after a foreclosure auction has already been held will not save your home. If you file a Chapter 13 prior to the auction, then the automatic stay takes effect. That stops the auction. Then can make up missed mortgage payments over an extended period of time. But filing bankruptcy after a foreclosure auction is too late.

Likewise, if you file Chapter 13 after your landlord has obtained an eviction judgment, then the bankruptcy will not prevent eviction. You must file the bankruptcy prior to your landlord’s obtaining an eviction judgment.

Filing bankruptcy after a repossession, in some cases, will allow you to get your vehicle back. But the creditor will charge you handsomely for the repo costs and fees. It is usually preferable to file Chapter 13 prior to repossession.

When waiting to file makes more sense

Filing a Chapter 13 bankruptcy during a civil litigation case will not result in the case’s being dismissed. Instead, the case will only be “stayed” temporarily. Usually, bankruptcy courts will allow the plaintiff relief from the automatic stay to allow the litigation to go forward. This allows the claim to be litigated — and liquidated — in the proper venue. Often it makes sense to allow the litigation to run its course prior to filing a Chapter 13 bankruptcy.

Waiting to file until the first of the month might make sense, too. Filing a Chapter 13 bankruptcy after your latest mortgage payment comes due allows you to include that payment in your Chapter 13 plan. On the other hand, if you file near the end of the month, then your first mortgage payment will come due within a few days after your filing. Sometimes this can strain your budget and even cause missed payments.

Especially at the beginning of a Chapter 13 case, you don’t want timing issues to trip you up. The Chapter 13 trustee will scrutinize your case for feasibility to determine whether you have the ability to repay. If you miss mortgage or vehicle payments or fail to make your Chapter 13 Plan payment, your case may be in peril.

Don’t let timing throw you off

Call Lee Legal to schedule a free, comprehensive financial analysis. When to file a case is often just as important as whether to file at all. We will help you identify the issues and develop a plan to allow you to move on with your life.

Get an overview with the Case Summary

At a glance, you can get a quick snapshot of the status of your Chapter 13 bankruptcy on the Case Summary tab. You can see your latest payments, the total amount you have paid into your Chapter 13 Plan, and the amount of any unpaid funds that the trustee has on hand.

Track your creditors with Claim Summary

See who the trustee pays (and how much) on the Claim Summary tab. You can see the creditor, type of claim, claim amount, principal and interest paid, and how much you have left on each creditor claim.

Get a visual view through the Account Ledger

On the Account Ledger tab, you can view your receipts and disbursements. The “receipts” are the amounts that you have paid into your Chapter 13 Plan. And “disbursements” are the amounts the Chapter 13 trustee has paid to creditors. The Account Ledger can be sorted at the top through the “Filter By” parameters. The Account Ledger provides a chronological view of your entire Chapter 13 case.

Track your Chapter 13 Bankruptcy with the NDC

Since 2006, nearly all Chapter 13 trustees have provided case data on a nightly basis. Every Chapter 13 debtor thinks from time to time, “How long do I have to go with my Chapter 13?” Use the NDC to track your Chapter 13 bankruptcy.

If the numbers on the NDC do not match what you expected, or a creditor claim looks wrong, call me at (202) 448-5136. Claim objections have deadlines, and a bad claim paid for five years is real money.

In July 2019, the Consumer Financial Protections Bureau (CFPB) released a report on Third Party Debt Collections Tradeline Reporting, based on the latest data available, from Q2 2018. A “tradeline” is another name for an entry on your credit report. Tradelines are considered negative credit items and can remain on a credit report for seven years.

The debt buyer and debt collection industry

The CFPB estimates there are 9,330 debt collectors and debt buyers in the United States. The top four largest debt buyers reported 90 percent of all reported buyer tradelines on credit reports. Debt collectors often become debt buyers, as the CFPB notes:

Debt collectors usually work traditional,
non-buyer accounts
on a contingency fee basis
while they work buyer accounts
by purchasing portfolios of accounts
and keeping all of what they collect.

Market Snapshot,
CFPB (July 2019)

Debt in collection on your credit report? It’s likely a medical debt.

Two-thirds of creditor-collector credit report entries were for medical debts. And medical debts accounted for 58 percent of all third-party collections (debt buyers and debt collectors) as of Q2 2018. But debt collectors frequently report derogatory information for utilities and telecommunications, as well.

These types of credit entries particularly damage credit because they represent nonfinancial debts. Moreover, hospitals and cell phone companies do not report positive payment information to credit bureaus, so the only time these types of debts show up on a credit report are when the information is negative.

Medical debts are dischargeable in bankruptcy

If you have a bunch of medical debts on your credit report, you should consider filing bankruptcy to discharge them. Focus on your recovery — not on the debt. Call an experienced bankruptcy attorney to discuss your options.

In the last quarter of 2018, U.S. student loan delinquencies reached a record of $166 billion, an all time high. For many borrowers, even income-based repayment presents significant challenges to maintaining sustainable payment amounts on their student loans. Student loan forgiveness would provide relief to these distressed borrowers.

Student loans are generally nondischargeable in bankruptcy

Only in rare cases are student loans allowed to be discharged in bankruptcy. That’s because, since 1976, Congress has steadily chipped away at the bankruptcy discharge for student loans. Now, student loans can be discharged in bankruptcy only if the debtor can demonstrate undue hardship, which is a very difficult standard to prove.

There exists no compelling rationale to treat student loans differently than other types of student loan debt.

Unemployment, underemployment, disability, divorce, or the death of a spouse can all lead to a persistent or even permanent inability to repay student loans. Millions of Americans struggle to make the minimum payments on these loans, often without ever making a dent in their debt.

Student loan forgiveness

The political establishment appears finally to be taking notice.

On June 2019, Senator Elizabeth Warren (D-MA) and Representative James E. Clyburn (D-SC) announced bicameral legislation to provide student loan forgiveness to 95 percent of borrowers, or more than 42 million Americans. The law would completely cancel student loan debt for more than 75 percent of Americans with student loan debt.

Also in June 2019, Senator Bernie Sanders (D-VT) has proposed legislation to completely eliminate the student loan debt of every American. Under Sanders’ plan, all student debt of any kind would be canceled if the legislation is passed into law.

In addition, currently under consideration in Congress are H.R. 770 Discharge Student Loans in Bankruptcy Act of 2019, which would allow the discharge of both federal and private student loans in bankruptcy.