Your Federal Job Was Supposed to Be the Safe Bet

For most of your career, it was. Steady income, good benefits, a pension, and the kind of job security the private sector rarely offers. That assumption is gone.

Tens of thousands of federal employees and contractors across DC, Maryland, and Northern Virginia are now facing sudden income disruption. The debt doesn’t take a break because your paycheck did. The mortgage company isn’t waiting. The credit card bills don’t pause.

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

When the Bills Don’t 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. Medical bills. Credit cards that started covering the gaps.

Losing the income doesn’t erase those obligations. It just puts you under pressure to solve them.

I’ve spent the last two decades working with federal employees and contractors through exactly this kind of situation. I know what the options look like. I’ll be straight with you about which ones make sense.

What Lee Legal Can Help With

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

Chapter 13 / Save Your Home. Stop foreclosure, catch up on missed mortgage payments, and keep your home. The right tool if you have steady or returning income.

Wage Garnishment Defense. The automatic stay kicks in the moment you file. It stops garnishments immediately. Call me before your next paycheck is touched.

Security Clearance Guidance. Cleared employees need an attorney who understands how the adjudicative guidelines work. I’ve handled this intersection many times.

Government Contractor Cases. Lost a contract or task order? Contractor cases have specific income documentation issues and means test complexity. I know the landscape.

Free Debt Consultation. Not sure bankruptcy is right for you? I’ll go through every option with you at no charge.Lee Legal handles bankruptcy and debt relief for federal employees and contractors throughout Washington DC, Maryland, and Northern Virginia.

Federal Employee Bankruptcy: Your Questions Answered

Here are some answers to the questions federal employees and contractors ask most often. Every situation is unique — contact us for guidance specific to yours.

What’s the difference between Chapter 7 and Chapter 13?

Chapter 7 eliminates most unsecured debt — credit cards, medical bills, personal loans — and wraps up 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 you’ve had a recent income drop, you may now qualify for Chapter 7 even if you didn’t before. I’ll run the numbers with you.

Can a federal employee file for bankruptcy?

Yes. Federal employees have the same right to file for bankruptcy as anyone else. Filing doesn’t automatically affect your employment status or your security clearance, though it may be reviewed during a clearance adjudication. I’ll walk you through what that means for your specific situation.

Will Bankruptcy Hurt My Security Clearance?

This is the first question cleared employees ask. Here’s the answer: unresolved debt is a bigger threat to your security clearance than bankruptcy.

The adjudicative guidelines treat unpaid judgments, wage garnishments, and ignored lawsuits as red flags. Financial hardship from job loss or circumstances outside your control is explicitly treated as a mitigating factor. Taking action is better than letting the pile grow. I’ve handled many cleared employee cases and know how to approach this carefully.

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

Yes, and it matters. Contractors often face a harder landing — no severance, no COBRA equivalent, fewer protections. The bankruptcy process also handles contractors differently, especially around income documentation and the means test.

Whether you’re a 1099 contractor, a W-2 employee of a firm that lost its award, or a small business owner who held the contract, I’ve handled your situation before.

What’s the difference between Chapter 7 and Chapter 13?

Chapter 7 wipes out most unsecured debt — credit cards, medical bills, personal loans — and typically closes in 3 to 6 months. Chapter 13 sets up a 3 to 5 year repayment plan and is the tool for stopping foreclosure and saving your home.

If you’ve had a recent income drop from a layoff or pay cut, you may now qualify for Chapter 7 even if you didn’t before. I’ll run the numbers with you.

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

Yes, and fast. The automatic stay goes into effect the moment you file. It halts garnishments, bank levies, collection lawsuits, and most foreclosure proceedings immediately. Call me before it gets worse.

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

File Chapter 13 before foreclosure moves further. The automatic stay stops the proceeding immediately. A repayment plan then lets you catch up on missed payments over time while staying in your home. Virginia and Maryland foreclosure timelines are fast. Don’t give it more runway.

Are my FERS pension or federal retirement benefits protected in bankruptcy?

Yes. FERS, CSRS, and TSP accounts are protected under federal and state exemptions. You don’t have to touch your retirement to deal with your debt. Most federal employees I work with don’t know this going in.

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 are generally not dischargeable, though hardship exceptions have more room than they used to. Child support and alimony can’t be discharged. I’ll go through every debt you carry so you know exactly where you stand.

Is there a free consultation available?

Yes. You’ll speak directly with me — not a paralegal, not an intake form, not a chatbot. I’ll review your finances, explain your options clearly, and give you a straight answer on the best path forward. No fee, no obligation.

How long does the bankruptcy process take?

Chapter 7: three to six months from filing to discharge. Chapter 13: three to five years, structured through a court-supervised repayment plan. Either way, relief starts the day you file. The automatic stay goes into effect immediately, and that alone changes the pressure you’re under.

Do you serve clients throughout the DC metro area?

Yes. I serve clients in Washington DC, Maryland (Montgomery County, Prince George’s County, and surrounding areas), and Northern Virginia (Fairfax County, Arlington, Alexandria, Loudoun County, Prince William County, and beyond). I file in all three federal bankruptcy courts covering this region and know each court’s local rules well.

Is there a free consultation?

Yes. You’ll talk directly with me — not a paralegal, not an intake form. I’ll go through your situation, explain your options, and give you a straight read on the best path forward. No fee, no obligation.

Evenings and weekends available. Phone, Zoom, or in person in downtown DC.

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 unpaid 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.

Lee Legal files cases in the US Bankruptcy Courts for the District of Columbia, the District of Maryland, and the Eastern District of Virginia. I know each court’s local rules and how they run.

Your First Step Is a Free Conversation.

You’ll talk directly with me. I’ll 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.

Being served with a lawsuit over an unpaid debt is alarming, but it does not mean the situation is hopeless. Whether the suit was filed by an original creditor, a debt collection agency, or a debt buyer, you have legal rights and more options than you might think. The worst thing you can do is ignore the lawsuit or assume there is nothing to be done. The best thing you can do is hire an experienced debt defense attorney as quickly as possible.

Every year, tens of thousands of consumers in Virginia, Maryland, and Washington, DC are sued for credit card debt, medical bills, personal loans, auto deficiencies, and other consumer debts. Many of those consumers never respond to the lawsuit, allowing the creditor to obtain a default judgment against them. A default judgment can lead to wage garnishment, bank account levies, and liens on your property, all without you ever having the chance to defend yourself.

An experienced, highly rated debt defense lawyer can change that outcome entirely. From challenging whether the creditor has the legal right to sue, to negotiating a favorable settlement, to fighting the case at trial, a skilled debt defense attorney gives you the tools and representation you need to protect your finances and your future. That is exactly what Lee Legal does for clients across Virginia, Maryland, and Washington, DC.

What Can a Debt Defense Attorney Do for You?

A debt defense attorney represents consumers who have been sued — or who are being threatened with a lawsuit — over an unpaid debt. This is a specialized area of law that sits at the intersection of consumer protection, contract law, and civil litigation. Not every attorney is equipped to handle these cases effectively. You need someone who understands the tactics creditors and debt collectors use, the procedural rules that govern civil debt lawsuits, and the consumer protection laws that may give you powerful defenses and even counterclaims.

When you hire a debt defense lawyer, here is what they can do for you:

• Review the lawsuit and all supporting documents to identify weaknesses in the creditor’s case
• Verify whether the creditor or debt buyer actually has legal standing to sue you
• Examine whether the statute of limitations has expired, which may be a complete bar to the lawsuit
• Challenge the accuracy of the alleged debt amount, including improper fees and interest
• Identify violations of the Fair Debt Collection Practices Act (FDCPA) or state consumer protection laws that may give you grounds for a counterclaim
• Negotiate a settlement that reduces or eliminates the debt, often altogether avoiding judgment and protecting your credit
• Represent you at hearings and trial if the case cannot be resolved through negotiation
• Protect your wages, bank accounts, and property from garnishment and levy

You do not need to have a perfect defense to benefit from legal representation. Even in cases where some debt is legitimately owed, a skilled debt lawsuit defense attorney can negotiate a settlement for less than the full amount, arrange a manageable payment plan, and sometimes ensure that no judgment is entered against you. 

The right attorney does not just play defense. Lee Legal lead attorney Brian V. Lee looks for every opportunity to leverage the law to your advantage. An outstanding litigator with debt defense experience can turn what feels like a losing situation into a manageable one, and sometimes into a win. Lee Legal brings exactly that approach to every client we represent.

How to Choose the Best Debt Defense Lawyer for You

If you have been served with a debt collection lawsuit, you may be searching for a debt defense attorney near you, a consumer debt defense lawyer, or a credit card debt lawsuit attorney. Lee Legal also frequently defends clients in lawsuits brought by QuarterSpot and On Deck. Here is what to look for when evaluating your options:

Relevant experience. Look for an attorney or firm that specifically handles consumer debt defense and civil litigation, not a general practice firm where debt defense is an occasional side matter. Brian Lee anticipates creditor tactics and knows how to respond.

Local knowledge. Debt lawsuits are governed by state procedural rules, local court practices, and jurisdiction-specific statutes of limitations. A top-rated attorney with experience in Virginia, Maryland, and Washington, DC courts will have a significant advantage over one who is unfamiliar with local practice. While settlement is often the right outcome, you want an attorney who is genuinely prepared to fight in court if that is what your case requires.

Client focus. Facing a debt lawsuit is stressful and often embarrassing. You deserve an attorney who will explain the process clearly, keep you informed, and treat you with respect, not one who makes you feel like just another file number.

Transparent fees. Lee Legal charges hourly fees, not flat fees. In cases involving FDCPA violations, attorney’s fees may be recoverable from the opposing party. The potential costs of your case are explained upfront, from the start.

Brian Lee has represented consumers in debt lawsuits involving credit card debt, personal loans, business loans, rent arrearage, just to name a few. He knows how creditors and debt buyers operate and how to defend against them effectively.

Why Lee Legal for Debt Defense in Virginia & DC

Lee Legal is a highly regarded litigation firm with deep experience in consumer debt defense across the Washington, DC area. When you are looking for a debt defense attorney who will actually fight for you, Lee Legal is the firm to call.

What sets Lee Legal apart:

• Experienced debt collection defense representation, grounded in an understanding of both the law and the litigation tactics creditors use
• Representation in Virginia, Washington, DC, and Maryland (federal courts) — giving clients tri-jurisdictional coverage that matters when creditors are operating across state lines
• A genuine willingness to go to court when that is in your best interest
• Evaluation of every case for potential FDCPA counterclaims and other consumer protection claims that could shift leverage in your favor
• Free, confidential consultations so you can understand your options before making any commitment

Whether you have just been served, are facing a hearing date, or are dealing with a judgment that has already been entered, Lee Legal can help. Call today to speak with a highly rated debt defense lawyer who will assess your situation and tell you exactly where you stand.

Schedule a Free Debt Defense Consultation

If you have been sued over a debt, or if a debt collector is threatening legal action, do not wait. Every day you delay is a day the creditor’s attorneys are working against you. Lee Legal is ready to review your case, explain your defenses, and build a strategy to protect you.

Call Lee Legal today to schedule your free, confidential consultation. There is no cost and no obligation, just straightforward answers from an experienced, top-rated debt defense attorney who is on your side.

Frequently Asked Questions: Hiring a Debt Defense Attorney

If you are facing a debt lawsuit or dealing with aggressive debt collection, you likely have questions. Here are answers to the ones we hear most often from clients in the DC region.

What happens if I ignore a debt collection lawsuit?

If you do not respond to a debt lawsuit within the required timeframe, typically 21 to 30 days depending on the jurisdiction, the court will likely enter a default judgment against you. A default judgment is a court order stating that you owe the full amount claimed. With that judgment in hand, the creditor can garnish your wages, levy your bank accounts, and place liens on your property. Ignoring a lawsuit is almost always the worst possible response. Contact a debt defense attorney as soon as you are served to preserve your options.

How much time do I have to respond after being served with a debt lawsuit?

The deadline varies by court and jurisdiction. In Virginia General District Court, you typically have 21 days to respond. In Washington, DC, you generally have 30 days from the date of service to file a written response. Missing this deadline can result in a default judgment. If you are unsure of your deadline, contact Lee Legal immediately. The summons can be reviewed and you will be told exactly how much time you have.

Can a debt defense attorney really get a debt lawsuit dismissed?

Yes, in some cases. Debt buyers and collection agencies frequently file lawsuits without adequate documentation, after the statute of limitations has run, or without proper legal standing to sue. An experienced debt lawsuit defense attorney will scrutinize the creditor’s case for these and other deficiencies. When defenses exist, they can result in dismissal of the case entirely. Even when the debt is legitimate, a skilled attorney can often negotiate a resolution that avoids judgment and protects your financial interests.

What is the statute of limitations on debt collection lawsuits?

The statute of limitations is the legal deadline by which a creditor must file a lawsuit. After that deadline passes, the debt is considered time-barred and the lawsuit should be dismissed. The applicable period depends on the type of debt, the terms of the original contract, and the state law that governs the account. In Virginia, the statute of limitations for written contracts is generally five years. Maryland allows three years for most consumer debt. Washington, DC allows three years as well, though specifics depend on the type of account. A highly rated debt defense lawyer will analyze whether the statute of limitations applies to your case.

What is the Fair Debt Collection Practices Act, and how does it help me?

The Fair Debt Collection Practices Act (FDCPA) is a federal law that prohibits debt collectors from using abusive, deceptive, or unfair practices when collecting debts. It applies to third-party debt collectors and debt buyers, though not typically to original creditors collecting their own debts. Many states have analogous protections that apply more broadly. If a debt collector violated the FDCPA by making false statements, misrepresenting the amount owed, contacting you at prohibited times, threatening actions they cannot legally take, or suing on a time-barred debt without proper disclosure, you may have a counterclaim against them. FDCPA violations can entitle you to statutory damages and attorney’s fees, which shifts significant leverage in your favor. Lee Legal reviews every debt defense case for potential FDCPA and state consumer protection claims.

Do I have to go to court if I hire a debt defense attorney?

Not necessarily. Many debt lawsuits are resolved through negotiation before a court hearing is required. An experienced attorney can often negotiate a settlement, a payment arrangement, or a dismissal without you ever having to appear in court. That said, some cases do require court appearances, either because the creditor refuses to negotiate reasonably or because your strongest path to a favorable outcome is litigation. If court attendance is required, you will be fully prepared, and as an outstanding litigation firm, Lee Legal is equipped to represent you at every stage of the proceeding.

Can I be sued for a debt that was already discharged in bankruptcy?

No. If a debt was legally discharged in a bankruptcy proceeding, it cannot be collected through a lawsuit. If a creditor attempts to collect or sue on a discharged debt, that is a violation of the bankruptcy discharge injunction and can itself be actionable. If you believe you are being sued for a debt that was discharged in bankruptcy, contact Lee Legal immediately.

What types of debts does Lee Legal defend against?

Lee Legal defends clients against lawsuits and collection actions involving a wide range of consumer and commercial debts, including credit card debt, medical bills, personal loans, auto loan deficiencies, private student loans, retail charge accounts, lines of credit, and business debts. If you have received a lawsuit or a threat of legal action related to any unpaid debt, call for a free consultation to discuss your options.

Will hiring a debt defense attorney hurt my credit?

Hiring an attorney does not appear on your credit report and will not negatively affect your credit score. What does damage your credit is a judgment being entered against you. Settling a debt for less than the full balance can have some credit impact, but it is typically far less damaging than a court judgment, wage garnishment, or bank levy. The goal is always to find the resolution that best protects your financial health, including your credit, both now and in the long run.

How much does it cost to hire a debt defense attorney?

Fees vary depending on the complexity of the case, the court in which it is filed, and the type of representation needed. Lee Legal offers a free initial consultation so you can understand your situation and options before making any financial commitment. In cases involving FDCPA violations, attorney’s fees may be recoverable from the debt collector, meaning your legal defense may cost you nothing out of pocket. All fee structures are explained clearly during the consultation.

How do I get started with Lee Legal?

Getting started is simple. Call the office or use the website to schedule your free, confidential debt defense consultation. The lawsuit or collection action you are facing will be reviewed, your legal options will be explained in plain language, and a clear picture of how Lee Legal can help will be outlined. Do not wait. If you have been served with a lawsuit, your response deadline may be approaching fast. The sooner you call, the more options can be preserved for you.

Be calm, take it easy.

Do not get crazy just because a debt collector calls you. Crazy doesn’t help. Just calm down. It’s two people talking on the phone. Remember, you’re being recorded. Don’t become yet another YouTube fail.

Be your usual placid, easy-going self. Don’t let a debt collector ramp you up. Take it easy and remain calm.

No matter how quickly the agent talks, you don’t have to speak quickly. The collection agent can lose his marbles if he wants. You should keep your cool.

Tell them your story.

The reason that you’re not paying them is not simply because you don’t want to. The reason that you’re not paying them is because you can’t.

You don’t have the money, and you have no one to borrow the money from. You have no other sources of income. The creditor is not getting paid today.

The problem with telling one agent your story is that tomorrow you’ll have a new agent. It can be fun, sure, to try to find new ways to say the same thing, day in and day out. But eventually it becomes frustrating. Remembering to remain calm can become a struggle.

Tell them to go away.

Debt collectors are required by law to validate your debt in writing. Have them do that first.

They also can’t call you at work if they know your employer doesn’t approve. In fact, debt collectors can’t continue to call you at all, if you request, in writing, that they only communicate with you by mail.

The problem with telling a debt collector to stop contacting you is this: that doesn’t make the debt go away. Debt collectors can and will still attempt to collect on the debt. That includes litigation, garnishment, liens and forfeiture.

How to handle a call from a debt collector? Talk to an attorney.

If you’re getting call from a single, harassing debt collector, talk to an attorney. You may be able to turn the tables and sue the creditor for FDCPA violations. Debt collectors can’t call you before 8AM or after 9PM. They can’t use foul language or threaten you. There are lots of other prohibitions on debt collection activities.

If you’re getting calls from multiple debt collectors, talk to an attorney. You should consider addressing your debts through debt settlement or bankruptcy.

Stay calm, explain your story, or just tell them to go away. But don’t let a debt collector throw you off your game. Get your entire financial outlook straight despite their effort to collect on a single debt.

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.

Shady debt collector calls

Most of the calls I get are just fine. But some calls are misleading and even shamelessly deceptive. Just listen to this downright shady voicemail I got the other day.

Hi. This is Brian Moore, compliance officer calling with “the state.” I have a legal notice here that I will be bringing out in the next 72 business hours. Now I have been retained to come out between the hours of 4 and 6 p.m. to the address or place of employment. Now a valid state ID will be assigned to us. If you have any questions or concerns, or to be rescheduled, you will have to contact the filing party. The district office number, as showing here, 833-470-0485. Thank you for your time. You have officially been notified.

Note the casual use of pseudo-legal terms: compliance officer, retained, the filing party. Note the ominous references to “the state” and “valid state ID” and “the district office.” The voicemail also contains a thinly-veiled threat: the possibility of in-person confrontation with this person in the next “72 business hours,” whatever that is intended to convey. And the threat mentions a place of employment, too. For those not already scared enough to return the call, there’s a final menacing kicker: You have been officially notified.

Generally speaking, I’m not a big fan of scammers. But I truly detest it when someone tries to scam my clients. So I called the number.

I reached a company called S&S Check Services, supposedly based in Amherst, New York. The representative (who refused to identify himself) disclaimed any knowledge of a Brian Moore, or why their phone number was linked to this voicemail. But S&S is a debt collector. And they had one of my client’s accounts. It’s not a coincidence. It’s just plain shady.

We will take your shady debt collection calls

When you retain us, Lee Legal will take your debt collection calls. We do this for two reasons. First, debt collection calls are really, really annoying, and you need to focus on getting your bankruptcy filed. And second, as stated above, I hate it when creditors try to mess with my clients. We’ll take your creditor calls up to two weeks before filing.

Once we file your bankruptcy case, the calls stop. That’s because the automatic stay takes effect, and attempts at collection once a bankruptcy is filed can subject the creditor to heavy penalties and attorney’s fees.

1. Reinstatement. Mortgage reinstatement is your first and best option when facing foreclosure. When you reinstate your mortgage, you pay a lump sum to catch up your missed mortgage payments, late fees and charges.
2. Payoff. Payoff is similar to reinstatement, except instead of catching up on missed payments, you pay off the entire balance of the mortgage.
3. Modification. If reinstatement or payoff are not options for you, modification may be a good option. But it takes time, and modifications are frequently denied. Modification will stop a foreclosure fast only if you are well along in the process.
4. Refinance. If you are able to refinance your mortgage, you may be able to wrap missed payments into the new loan and even obtain a lower monthly payment.
5. Postponement. If you are very close to obtaining the funds necessary to reinstate your mortgage (and you can prove it to your lender via documentation), then you may be able to convince them to postpone the auction.
6. Injunction. In cases where your mortgage lender has committed serious errors in foreclosing on your home, you can sue the company and request an emergency injunction to stop the auction. These cases are extremely rare.
7. Bankruptcy. Chapter 13 bankruptcy stops foreclosure immediately and gives you the breathing room you need to reassess your options. Filing bankruptcy allows you to consider modification, reinstatement, and refinancing, as well as repayment over an extended period.

Call us to stop a foreclosure sale

We are thoroughly familiar with all of the options available to homeowners facing foreclosure. We can help you think through solutions and work out a plan suitable to your situation. Call Lee Legal at (202) 448-5136.

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.

Now a trustee will be assigned to each case

Now a standing trustee will oversee each case, assisting in the reorganization process and monitoring the business’s compliance with the Bankruptcy Code. The assignment of a trustee will greatly improve the chances of the successful completion of the plan of reorganization.

Only the debtor can propose a plan of reorganization

Previously, there was an exclusive period for a small business to propose a plan of reorganization, then any interested party could propose a plan for the business. Now, only the debtor can propose a reorganization plan. In addition, small business debtors no longer need obtain independent approval of a disclosure statement. Nor do small businesses in bankruptcy need to solicit votes for plan confirmation. These changes dramatically reduce the burden on small businesses in bankruptcy.

Small business bankruptcy is now more like Chapter 13

No longer must small business owners provide “new value” to retain control of their companies. Instead, the new law requires only that business owners commit all projected disposable income to the plan of reorganization, similar to a Chapter 13 bankruptcy. The plan’s term will span from three to five years, just like Chapter 13.

Small business bankruptcy just got easier

The Small Business Reorganization Act of 2019 greatly simplifies the bankruptcy process for small business owners. Business owners are no longer required to pay all debts in full in order to retain ownership of the business. The law provides more flexibility for business owners to reorganize, while cutting down the red tape.

If you are considering bankruptcy for your small business in the Washington, D.C. area, call Lee Legal for a free consultation.

What are non-qualified student loans?

Student loans are generally excepted from the bankruptcy discharge in 11 U.S.C. 523(a)(8). That section of the Bankruptcy Code prevents discharge of four distinct categories of educational loans:

1. Loans made, insured, or guaranteed by a governmental unit;
2. Loans fully or partially funded by a governmental unit or nonprofit institution;
3. Obligations to repay funds as an educational benefit, scholarship, or stipend; and
4. Any “qualified educational loan” as defined by Section 221(d)(1) of the Internal Revenue Code (“IRC”) of 1986.

The final category is the one we’re examining here. A “qualified educational loan” as defined by IRC 221(d)(1) is “any indebtedness incurred . . . solely to pay qualified higher education expenses.”

So in order to be a “qualified education loan,” the debt must be solely made for qualified higher education expenses. Thus, if a private student loan is partially outside the cost of attendance to a particular educational institution, then the entire loan is non-qualified and can be discharged. The IRC defines “cost of attendance” as “tuition, books and a reasonable allowance for room and board.” Loans made in excess of certified federal limits can be discharged in bankruptcy.

Make your case

Non-qualified private student loans made in excess of the “cost of attendance” are dischargeable. But you must file an adversary proceeding in your Chapter 7 bankruptcy to request that the court find those loans dischargeable.

Courts narrowly construe exceptions to discharge against creditors. So the student lender must (and will) fight your adversary proceeding and prove its case or your loan will be discharged in your Chapter 7.

You will need to meticulously document and calculate your loan amounts and for what purposes you used the funds. You will also need to research the cost of attendance figures for the institution(s) you attended. Student lenders do not just roll over in these cases, so you must be prepared to make your case.

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.

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.

According to a recent Pew Research study, less than half of Americans (46 percent) make more than they spend. Many people don’t even know the actual amount of their debt. Debt can be intimidating, which in turn causes some to simply ignore it.

Face your debt and assess your options

At times, life can present a situation that forces one to confront their finances, upfront and head-on. Regardless of the type of debt you have and the amount, paying it off can take years, if not decades. Of course, there are measures you can take in effort to achieve this goal, but bankruptcy is the quickest and least expensive way to alleviate your debt. Period.

Bankruptcy eliminates most types of debt, stops collections, and allows you to reorganize and catch up on missed car or mortgage payments. Chapter 7 bankruptcy is a good option for those that do not have the ability to pay all their debts, while a Chapter 13 is a reorganization bankruptcy for those that have the income to catch up over time. Bankruptcy is much less expensive than debt settlement.

A bankruptcy filing will be on your credit report and may initially lower your score, and that is a cost, too. But you can immediately begin to rebuild your credit following bankruptcy. This is the time to add new credit, like a secured credit card or small installment loan. Go forward making on-time payments ALWAYS for all debt, the old and the new. Not exceeding 30 percent utilization of your credit cards is also a good habit to practice.

Get rid of debt — and keep it that way!

If you continue moving forward with good financial habits, you can get rid of debt, rebuild your credit — and keep it that way! Consult a bankruptcy attorney to learn your options. Each bankruptcy case is different, relative to the person filing, so what may be true for one person may not be the case for another. But between allowing debt to continuously accumulate with no resolution versus allowing bankruptcy to give you a fresh start, the latter is the better option every time.

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.

You should seek private settlement with creditors, but once wage deductions have begun, they will not stop garnishment voluntarily. There are two ways to stop a garnishment: pay the debt or file bankruptcy.

Stop garnishment: Pay the debt

If you have the means to pay off the debt, then you can contact the attorney on the garnishment summons and make an offer. Be sure to get an accounting of the debt, including any credits from garnished wages. The creditor, at this point, holds a position of power. So it’s going to be difficult to settle for less than the full amount. Moreover, you will likely need a lump-sum payment, as opposed to monthly payments over time because the creditor already has monthly payments coming in.

Stop garnishment: File bankruptcy

When you file bankruptcy, the garnishment must immediately cease. Your attorney will notify your HR department to alert them to your filing information in order to stop the garnishment as soon as possible. The creditor may attempt to enforce its judgment in your bankruptcy case. But the garnishment must terminate upon the filing of the bankruptcy.

You can stop garnishment of wages with either Chapter 13 (through a repayment plan) or with Chapter 7 (straight discharge). Filing bankruptcy allows you to terminate the wage garnishment both immediately and permanently.

Stop garnishment of wages

Garnishment can endanger your relationship with your employer because wage garnishments are handled through the human resources department. Most employers are understanding when employees experience financial problems, however some employers are not. And wage garnishment adds another layer of administration, the costs of which are often passed on to employees in the form of “garnishment fees.”

If you are being garnished or a garnishment is imminent, call Lee Legal to determine your options.

Do it, don’t just say it

Your mortgage company will accelerate efforts to complete the foreclosure if they feel you may file bankruptcy. In some limited cases, you may be able to convince your mortgage company to voluntarily cancel an auction. But those cases are not common. The only legal way to assure that the foreclosure will not take place is to file bankruptcy.

Don’t tell your mortgage company you’re filing bankruptcy. Do it.

Completing a bankruptcy filing takes time. And you probably want to fix the underlying problem with the mortgage, not just cancel the sale. Chapter 13 bankruptcy allows you to repay your mortgage delinquency over as much as five years. Use bankruptcy not just to stop the sale but to get your mortgage (and other debts) back on track.

The bankruptcy threat

Just like in debt settlement negotiations, your attorney may use the threat of bankruptcy to negotiate with your mortgage company. The bankruptcy threat may induce your mortgagor to consider alternatives to foreclosure. But the threat is only credible when it comes from your bankruptcy attorney. And if you’re planning on filing bankruptcy anyway, there’s usually no reason to tell the mortgage company beforehand.

Keep your mortgage company happy

Mortgage companies want one of two things from their customers: either pay the mortgage or give up the house. At the same time, the foreclosure process is expensive, so that’s really their last resort. Mortgage companies step up efforts to complete a sale if they feel the homeowner may be taking steps to cancel an auction. If you receive notice of foreclosure, you should discuss your options with experienced bankruptcy counsel. But don’t tip your hand to your mortgage company before you have a clear plan.

Debt collectors don’t give up. They’re very motivated to hound you until the debt is collected. Why? Because collecting your debt is their source of income. Actually, they make money only if you pay the debt. Collection agencies get paid based on the amount they collect from you. Ignoring debt has many downsides.

Ignoring debt collectors won’t make them go away

Under new proposed rules, debt collectors could soon be able to send texts, emails and private-messages to collect on their debts — on an unlimited basis. Creditors will also continue to report nonpayment to the credit bureaus.

Verifying the debt is legitimate

You have the right to request validation of the debt under the Fair Debt Collection Practices Act. You should definitely find out if what they’re saying you owe as a debt is actually legitimate and whether the amount is correct. If you learn that it’s not legitimate, contact the collection agency right away to dispute the debt.

Missed opportunities to settle the debt

Interest, collection costs, and legal fees will be added and, of course, will increase with time. Seize the opportunity to make a payment arrangement with the debt collector. You may even be able to settle the debt for less than the original amount. But you must communicate with the collector to accomplish this.

Don’t get sued

A debt collector may file a lawsuit against you to collect on the debt. In most cases, this is just a matter of time. If you ignore the lawsuit, the creditor will obtain a default judgment against you. Wage garnishment is likely to follow. Any money in your bank account can also be garnished.

Debt doesn’t just disappear

Ignoring debt is like having a false safety net. It’s a progressively slippery slope. Obtain your credit report so you can make a comprehensive debt assessment. Prioritize your debt and make a realistic payment plan. You must contact the collectors and negotiate.

If you’re not able to reach an agreement or repayment isn’t feasible, then it may be time to contact a bankruptcy attorney. A legal professional can inform you of all of your options and help you obtain a new financial start.