Understanding how to manage an sba loan in bankruptcy is crucial for business owners facing financial difficulties.

Many people are unsure if they can discharge an sba loan in bankruptcy, and it’s important to know your options.

The implications of an sba loan in bankruptcy can vary based on the type of loan and the circumstances surrounding it.

Here’s the short answer: yes, SBA loans can be discharged in bankruptcy. But there’s a longer answer you need to hear before you decide what to do because personal guarantees, non-dischargeability exceptions, and what happens to your business make this more complicated than a simple YES or NO.

Understanding the terms of your sba loan in bankruptcy is vital to making informed decisions.

I’ve helped a lot of people work through exactly this situation. Let me break it down.

What Kind of SBA Loan Do You Have?

Not all SBA loans are the same, and the type matters.

Standard SBA 7(a) loans are the most common and are used for working capital, equipment, or business acquisition. These are made through private lenders and guaranteed by the SBA up to 85%.

SBA 504 loans fund major fixed assets like commercial real estate. They involve a private lender plus a Certified Development Company.

EIDL loans (Economic Injury Disaster Loans) are direct loans from the SBA, not through a bank. A lot of small business owners took these out during COVID. The rules for personal guarantees on EIDL are different depending on the loan amount.

When considering how to handle an sba loan in bankruptcy, it’s essential to evaluate your financial situation thoroughly.

Many borrowers find themselves asking, can I discharge my sba loan in bankruptcy, and the answer may depend on various factors.

It’s crucial to know the risks associated with your sba loan in bankruptcy, especially regarding potential fraud claims.

For those facing difficulties, understanding the process of discharging an sba loan in bankruptcy can relieve some stress.

Why does it matter? Because the structure of the loan (who you borrowed from, what collateral you pledged, whether you signed a personal guarantee) shapes what happens in bankruptcy.

In cases of willful misconduct, the outcome of an sba loan in bankruptcy can be significantly affected.

Considerations for Discharging an SBA Loan in Bankruptcy

Understanding fiduciary misconduct related to an sba loan in bankruptcy can help avoid complications.

The general rule: SBA loans are unsecured or partially secured debt. In a Chapter 7 bankruptcy, dischargeable unsecured debt gets wiped out. Your personal obligation to repay it disappears.

But there are exceptions. Section 523 of the Bankruptcy Code lists debts that survive bankruptcy regardless of what chapter you file. Here are the dischargeability exceptions most relevant to SBA borrowers:

The personal guarantee on an sba loan in bankruptcy can complicate your ability to discharge the debt.

When you file for bankruptcy, the personal guarantee associated with an sba loan in bankruptcy may become a pivotal issue.

Fraud and Misrepresentation

If you obtained the loan through false pretenses (overstating revenue, falsifying financial records, misrepresenting how you’d use the funds) then the SBA or lender can file an adversary proceeding to have the debt declared non-dischargeable. The risk here isn’t trivial. The SBA reviews loan applications carefully when borrowers file for bankruptcy, and discrepancies get flagged.

That said, most SBA borrowers didn’t commit fraud. They just ran businesses that failed. Honest business failure is not fraud.

Willful and Malicious Injury

This one is less common in the SBA context, but it can come up if you dissipated collateral or sold off business assets that secured the loan, for example, without the lender’s consent.

Filing for bankruptcy can offer relief from the obligations of an sba loan in bankruptcy, depending on your situation.

Fiduciary Misconduct

Understanding what happens when facing an sba loan in bankruptcy can help you better prepare for the process.

The implications of an sba loan in bankruptcy extend beyond just the debt itself; they can affect your entire financial future.

If you were operating in a fiduciary capacity and misapplied funds, that debt can be non-dischargeable. Again, this is uncommon for typical SBA borrowers, but worth knowing.

The takeaway: for most people who took out SBA loans in good faith, ran into trouble, and are now looking at bankruptcy, non-dischargeability is not the biggest concern. The personal guarantee usually is.

If you’re facing litigation regarding an sba loan in bankruptcy, understanding your rights is crucial.

The Personal Guarantee Problem

Timing plays a significant role when dealing with an sba loan in bankruptcy and its related legal procedures.

Almost every SBA loan over $25,000 requires a personal guarantee. For EIDL loans, the threshold was $200,000 during COVID. If you’re above those numbers, you signed a guarantee. That means you’re on the hook personally, not just your business.

Here’s what the personal guarantee means in practice:

Bankruptcy can provide a reset for your financial obligations, including your sba loan in bankruptcy.

Exploring your options when dealing with an sba loan in bankruptcy is important to avoid unnecessary complications.

• The SBA or lender can sue you personally if the business defaults.
• They can get a judgment against you individually.
• They can garnish your wages, levy your bank accounts, or place liens on your home.

Bankruptcy changes this. When you file for personal bankruptcy, either Chapter 7 or Chapter 13, the automatic stay kicks in immediately and all collection activity stops. If you receive a discharge, your personal liability under the guarantee is eliminated.

The business’s debt to the lender doesn’t go away. The lender can still pursue the business. But your personal exposure will be discharged in your personal bankruptcy.

SBA loan in bankruptcy situations often require careful navigation to ensure your rights are protected.

What Happens When the SBA Sues You

You got the default notice. Maybe you’ve been ignoring calls. Now you may be facing a lawsuit, either from the SBA directly, or from the lender, or both. A few things to know:

The SBA Refers Cases to the Department of Justice

When an SBA direct loan defaults (like an EIDL), the SBA can refer the account to the U.S. Department of Justice for collection. The DOJ can sue you in federal court and has broader and more powerful collection tools than a typical private creditor.

Private Lender Lawsuits

For SBA 7(a) loans, the private lender typically pursues you. After paying their claim to the SBA (using the SBA guarantee), the lender is entitled to collect the unguaranteed portion from you. The SBA may separately seek recovery on the guaranteed portion.

Timing and the Bankruptcy Filing

Understanding the implications of an sba loan in bankruptcy can help you make informed decisions about your financial future.

When filing for personal bankruptcy, knowing how an sba loan in bankruptcy affects your assets is crucial.

Filing for bankruptcy once you’re already being sued stops the lawsuit cold. The automatic stay halts pending litigation against you personally. If a judgment has already been entered, bankruptcy can still discharge the underlying debt, however judgment liens on real property require additional steps to address.

Don’t wait until a judgment is entered to call an attorney. Once a lien attaches to your home, your options narrow.

In a Chapter 7 case, your sba loan in bankruptcy may lead to liquidation of assets if not carefully managed.

Do You Need to File Business Bankruptcy, Too?

This is one of the most common questions I get: do I need to file for my business at the same time I file personally?

Reorganizing your debts, including an sba loan in bankruptcy, can lead to more favorable outcomes for business owners.

The short answer: usually no. Here’s why.

Understanding the consequences of an sba loan in bankruptcy will prepare you for what lies ahead.

If your business is a sole proprietorship, there’s no legal distinction between you and the business. A personal bankruptcy covers both.

If your business is an LLC or corporation, it’s a separate legal entity. Your personal bankruptcy discharge eliminates your personal liability, but it does not discharge the business’s debts. The lender can still pursue the business entity.

But here’s the practical reality: if the business has failed or is failing, there often isn’t much left for the lender to pursue. A lender suing a defunct LLC with no assets gets nothing. The personal bankruptcy is what actually protects you from collection efforts.

A simultaneous business bankruptcy might make sense if:

• The business has significant assets that need to be administered in an orderly way.
• The business has ongoing operations you want to restructure (Chapter 11 territory).
• There are other creditors beyond the SBA (employees, vendors, commercial landlords) with claims that need to be addressed in a coordinated way.
• You’re trying to sell the business as a going concern and want the protection of the automatic stay while you finalize the sale.

For most small business owners in default on an SBA loan with a failed or failing business, a personal bankruptcy without a simultaneous business filing is the right approach. We can talk through your specific situation.

What Happens to Your Business When You File for Personal Bankruptcy?

This depends on the structure of your business and what chapter you file.

Chapter 7 Liquidation

In a Chapter 7, the bankruptcy trustee takes control of your non-exempt assets and liquidates them to pay creditors. Your ownership interest in a business is an asset. If the business has value, the trustee can sell your interest or sell the entire business.

If the business is a defunct LLC with no assets, the trustee typically abandons the interest as valueless. If the business is an operating business with equity, then the trustee could sell your ownership stake or liquidate the entire business.

There are ways to address this. Exemptions in DC, Maryland, and Virginia vary. And if the business’s value is modest, the trustee may not bother. But this is a real consideration, and one we work through carefully before recommending Chapter 7 for a business owner.

Chapter 13 Reorganization

Your experience with an sba loan in bankruptcy should guide your decisions and actions moving forward.

In Chapter 13, you keep your assets and pay back a portion of your debts over three to five years. Your business interest is protected. The SBA loan (or the unsecured portion of it) gets lumped in with other unsecured debt and paid a fraction on the dollar through the plan. In many cases, creditors receive nothing.

Chapter 13 is often the better fit for business owners who want to keep an operating business, have non-exempt assets they want to protect, or have income above the Chapter 7 means test threshold.

When Bankruptcy Won’t Help: What Happens When the SBA Objects to Discharge

Not every SBA bankruptcy story ends with a clean discharge. And if you made misstatements on your application — intentionally or not — the SBA or lender can file an adversary proceeding to prevent the debt from being discharged.

This is where the stakes get real.

A Real Case: Undisclosed Litigation

A business owner with decades of experience applied for an EIDL during the pandemic. She was also involved in ongoing probate litigation at the time. She did not disclose the litigation on the loan application.

Years later, she filed for bankruptcy and sought to discharge the EIDL.

The SBA filed an adversary proceeding under Section 523(a)(2)(B), alleging fraud. They argued she had made a materially false statement about her financial condition by omitting the probate case.

In a July 3, 2025 Memorandum Decision (Case No. 23-03043, Bankr. N.D. Cal.), the bankruptcy court found against her. The pending litigation was a contingent liability that should have been disclosed. The fact that she personally believed the probate case was unwinnable didn’t matter. The loan application didn’t ask her opinion. It asked for facts.

The court called her testimony on the subject “beyond credulity.” Someone with her business experience should have known better. The court’s language was brutal: a businesswoman with decades of experience should have known better.

The EIDL debt was declared non-dischargeable. She still owes it.

If you’ve been running a business for years, the court won’t let ignorance be your defense.

What This Teaches

This debtor didn’t intentionally commit fraud. She just thought the litigation was immaterial. She made a judgment call and got it wrong. Unfortunately, Section 523(a)(2)(B) doesn’t care about intent. It cares about whether the statement was materially false and whether the lender relied on it.

Missing a line item on a loan application. A liability you thought was worthless. A detail you didn’t think mattered. Any of these can be enough for the DOJ to sue you.

Why This Matters to You

Understanding how to handle an sba loan in bankruptcy can empower you to take control of your finances.

The horror story above isn’t about a criminal prosecution (though that can happen too). It’s about an adversary proceeding, or a mini-lawsuit within your bankruptcy case filed by the SBA or lender seeking to make that specific debt non-dischargeable.

Here’s what the law requires them to prove under 11 U.S.C. § 523(a)(2)(B):

1. You made a written statement (your loan application) concerning your financial condition.
2. That statement was materially false, meaning it made a real difference to the lender’s decision.
3. The lender reasonably relied on it.
4. You caused the statement to be made with intent to deceive.

You might think that intent to deceive is the hard part to prove, but it’s actually not. Court focus instead on the falsity of the statement and the lender’s reliance. If the numbers don’t line up, that’s often enough.

This is why you should hire an experienced bankruptcy attorney before you file. Not after you’ve filed and the SBA has objected. Before. Lee Legal can review your application against your actual records, spot problems, and help you decide whether bankruptcy is the right move, or whether negotiating an Offer in Compromise with the SBA makes more sense.

Other Questions Clients Usually Ask

Will bankruptcy affect my ability to get SBA loans in the future?

Yes, for a period of time. The SBA has restrictions on extending credit to people who have previously defaulted on government-backed debt. A discharge in bankruptcy doesn’t automatically restore your eligibility. How long the bar lasts depends on the program. If future SBA borrowing matters to you, that’s a factor worth discussing.

What about collateral: my home, equipment, accounts receivable?

If the SBA loan was secured by specific collateral, the lien survives bankruptcy unless it’s stripped or surrendered. A Chapter 7 discharge eliminates your personal obligation to pay, but a secured creditor can still foreclose on the collateral. If your home is collateral on the SBA loan, that’s a significant issue we need to work through before you file.

My business partner also signed. What happens to them?

Your bankruptcy only covers you. Your business partner’s personal liability is unaffected by your filing. If they also signed a personal guarantee, your partner will remain fully exposed. This is a real tension point in partnerships, and it’s worth thinking through how a filing by one partner affects the other. In some cases, coordinated filings make sense.

Can I negotiate with the SBA instead of filing?

Yes. The SBA has an Offer in Compromise (OIC) program that allows borrowers to settle defaulted loans for less than the full balance. The SBA doesn’t make it easy, and they have strict eligibility requirements. The process is also slooow. But an OIC is a viable alternative to bankruptcy for some people. Whether it makes more sense than bankruptcy depends on your overall debt picture, your income, and your assets.

I already have a judgment against me. Is it too late?

Not necessarily. Bankruptcy can still discharge the underlying debt even after a judgment. But if the judgment creditor has recorded a lien against your real property, that lien doesn’t automatically go away. You may need a motion to avoid the lien as part of the bankruptcy process. The sooner you act, the more options you have.

The Bottom Line

SBA loans are dischargeable. Personal guarantees on SBA loans are dischargeable. If you’ve been living in fear of what the SBA or your lender can do to you, bankruptcy may be the exit ramp you’ve been looking for.

What it takes to get there, that’s what we figure out together. I’ve been doing this a long time. Give me a call and let’s talk through your situation.

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.

First and foremost, working with your HOA protects your investment. After all, in some cases you’re just one HOA vote away from a hellish nightmare. And HOAs can foreclose on community properties.

At their best, HOAs are annoying student council adults telling you to trim your shrubs and move your trashcans. But at their worst, they are glorified debt collectors with the power to upend lives and expel people from a neighborhood.

— John Oliver, Last Week Tonight

The proliferation of HOAs has been called the most significant privatization of local government responsibilities in recent times.

Here’s Last Week Tonight‘s take on HOAs:

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.

QuarterSpot loans also require small business owners to personally guarantee their loans. So when Titan Asset Purchasing sues a business, it also sues the business owner, personally.

Choice of venue: Arlington Circuit Court

Both QuarterSpot and Titan Asset Purchasing obtains hundreds of judgments annually against defendants all over the country. The location of the business is irrelevant. If a business defaults on its loan, then the litigation will take place in the Circuit Court of Arlington, Virginia. QuarterSpot requires this as part of its loan agreement. “Choice of venue” contract provisions predetermine where legal proceedings will take place. QuarterSpot also applies its choice of venue clause to arbitration.

Once Titan Asset Purchasing obtains a judgment in Virginia, it hires local counsel in the jurisdiction near the defendant, domesticates the judgment, and attempts collection directly against the owner. Often, the business has already gone under; the business owner remains the only entity against which to enforce its judgment.

Typically, business owners are not liable for the debts of their businesses. QuarterSpot, however, checks the business owner’s personal credit rating before it decides to extend credit, and they require a personal guarantee on every loan they make. Titan Asset Purchasing subsequently names individual business owners as defendants in every lawsuit it files. The business owner’s personal liability on that loan gives rise to concurrent liability for business and business owner alike.

Titan Asset Purchasing is able to obtain a very high percentage of default judgments in the lawsuits it files because the business owners do not live near enough to Arlington, Virginia to mount a defense themselves. That’s where we come in.

Titan Asset Purchasing Lawsuits in Arlington Circuit Court

Lawsuits in Arlington Circuit Court are initiated by the filing of a warrant in debt. Once served, you must take action to avoid a default judgment. Virginia general district court have very short timelines.

Do not simply ignore a creditor because your business has closed, especially if you have personally guaranteed a business loan. You must mount a defense. Do not allow a default judgment to be entered simply because the business is going under or because you live far away from the choice of venue. Creditors like QuarterSpot and Titan Asset Purchasing will use a default judgment against you personally.

Do not file anything with the court or talk to opposing counsel before you talk to an attorney. Lee Legal provides debt defense to clients facing lawsuits in Arlington General District Court, Arlington Circuit Court, Alexandria General District Court, and Alexandria Circuit Court.

Some debt collectors are pretty good at their jobs. The more adept debt collection companies will try to force you into making bad decisions. But you don’t have to let that happen. You have to take control of the situation.

Creditors can cancel your cards. They can report negative information to the credit bureaus. And they can file lawsuits to collect on their debts. They can also email you, text you, and direct message you on social media. And they can call you — a lot, every day, multiple times a day. Obviously, that can be very distracting.

We will make the calls stop. Once you retain our office, debt collectors must go through us. If they contact you at that point, it’s an FDCPA violation. If necessary, we will verify and dispute the debt. We will also investigate the collector to make sure they’re in compliance. We will keep you informed of your rights at every step in the process.

Finally, if the debt is valid, we will negotiate a work-out agreement with the collector on your behalf. Usually, a negotiated settlement can save you a lot of money in the long run.

You don’t have to deal with debt collectors on your own. Call (202) 448-5136 for a free consultation and we will start taking your debt collection calls.

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.

Mortgage forbearance

Under CARES, a borrower may request mortgage forbearance for up to 180 days. Lenders shall extend this period an additional 180 days at the request of the borrower. During the forbearance period, no fees, penalties, or interest beyond the amounts scheduled shall accrue to borrowers.

Lenders, servicers step up

In addition, the Federal Housing Administration put an immediate 60-day moratorium on foreclosures and evictions for single-family homeowners unable to pay their FHA-backed mortgages. Fannie Mae and Freddie Mac will also establish a forbearance program allowing borrowers to skip their mortgage payments for up to 12 months.

The government is essentially offering a year-long payment holiday so those who lose their jobs from COVID-19 can stay in their homes without worrying about mortgage payments or foreclosure.

Jaret Seiberg,
Cowen Washington Research Group

Servicers have lobbied for government assistance (i.e., access to liquidity) to fund forbearance programs. The CARES Act has provided that liquidity, as well as a pleasant surprise tax break for the 1 percent. Of course.

State actions

On March 30, 2020, Virginia governor Ralph Northam signed a “stay-at-home” executive order limiting residents from venturing outside their homes with the exceptions to get food and supplies, receive medical care, go to work, or to get fresh air or exercise. This is essentially a moratorium on foreclosure auctions. The executive order runs through June 10.

On March 18, 2020, the Maryland Court of Appeals entered an administrative order immediately halting both residential foreclosures and pending scheduled evictions. Additionally, new residential foreclosures and foreclosures of right to redeem after tax sales “shall be stayed upon filing.” On April 3, 2020, Maryland Governor Larry Hogan issued an emergency order prohibiting for 90 days (a) lenders from initiating foreclosures and (b) building owners from evicting commercial and industrial tenants.

On March 18, 2020, the District of Columbia stayed all evictions of tenants and foreclosed homeowners until May 15, 2020. By court order, D.C. also continued all hearings on small claims, debt collection, mortgage foreclosure, and housing court matters. On March 29, 2020, D.C. was approved for a major disaster declaration, which will open up more funding for emergency services for those affected by coronavirus.

If you can’t pay your mortgage due to coronavirus

Contact your lender immediately if you won’t be able to make your April mortgage payment. Find out what kind of relief they are offering under CARES, and whether there are any more advantageous internal programs available to you. Neither the coronavirus pandemic nor the moratorium relieve you of your duty to stay on top of your finances. Be proactive and chart a path forward.

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.

QuarterSpot small business loans

Online small business lender QuarterSpot provides short-term business loans for bad-credit borrowers. QuarterSpot offers six- to 18-month loans up to $250,000 at interest rates from 30 percent to 70 percent.

Business owners are typically not responsible for the debts of a business. QuarterSpot, however, checks the business owner’s personal credit rating before it decides to extend credit and requires a personal guarantee. A business owner’s personal liability on a business loan gives rise to concurrent liability for the business and owner alike.

On March 22, 2019, the Securities and Exchange Commission sued investment advisor Direct Lending Investments (or DLI), in part for falsifying loan repayment information reported by QuarterSpot.

QuarterSpot lawsuit in Arlington or Alexandria? Get a lawyer pronto.

Over the past few months, QuarterSpot has obtained hundreds of judgments simultaneously against both business and business owner. You cannot simply ignore QuarterSpot because your business has closed, especially if you have personally guaranteed a business loan. You must mount a defense. Do not allow a default judgment to be entered simply because the business is going under or because you live far away from the choice of venue.

Plaintiffs like QuarterSpot initiate collections lawsuits in Virginia by filing a warrant in debt. Once served, you must take action. Virginia general district court have very tight timelines.

Do not file anything with the court or talk to opposing counsel before you talk to an attorney. Lee Legal provides debt defense to clients facing lawsuits in Arlington General District Court and Alexandria General District Court. You can reach us at (202) 448-5136.

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.

What is third party debt collection?

Third party debt collectors attempt to collect on debts owned by creditors. These types of debt collectors include agencies, companies, and lawyers. Typical creditors who use third party debt collectors are hospitals, vehicle lenders, utilities, and banks. Often, these creditors outsource their collections to allow them to focus on their core business. Almost as often, creditors employ third party collectors to avoid the dirty business of debt collection.

Debt collectors have vast (and growing) resources

More than 70 million Americans have at least one debt collection item on their credit reports. And debt collectors are currently chasing over $211 billion in overdue debt.

Debt collectors have an expanding set of resources available to them:

• 80 percent of debt collectors use skip tracing

• Debt collectors also widely use other techniques like call recording, predictive dialing, and automated speech analysis
• 21 percent of debt collectors attempt collection on debts that are past the statute of limitations

“Call bombardment” is common method employed by debt collectors. Only 49 percent of collectors limit the number of contacts per week. And just 53 percent of collectors limit the number of contacts per day. Most of these calls involve, of course, threatening to penalize the consumer for not engaging with the collector.

Moreover, debt collectors are looking to new technology to amplify their efforts. 61 percent of debt collectors currently use email, yet another 22 percent are considering adding email to their procedures. No fewer than 69 percent of debt collectors either use or are considering using SMS text messages to contact consumers. And 30 percent of debt collectors are currently using or exploring the use of social media to reach debtors.

Hire your own lawyer for debt defense

Some creditors rarely resort to litigation, while other creditors invariably sue. If you are sued by a debt collector, it should be clear that they intend to collect on your debt. The next step after judgment is garnishment, attachment, lien, and yet more collection efforts.

Many consumer debtors often face an imbalance of power, but that need not be the case for you. Hire your own lawyer for debt defense.

Foreclosure defense lawyer in Washington DC

In Washington DC, once you receive notice of the complaint for judicial foreclosure, the clock starts ticking. You have options, but many of them are available to you only if you act quickly. As soon as you receive notice that you are being sued for judicial foreclosure, contact a foreclosure defense attorney immediately. Missed deadlines can be fatal to your case.

Your options include mediation, modification, refinance, sale, surrender, and Chapter 13 bankruptcy. Not all of these options are always available, but usually a homeowner has choices. We will help you assess your situation to determine the best course of action for you.

Foreclosure defense lawyer in Virginia

Foreclosure in Virginia can happen very quickly. While foreclosure in DC is judicial (and thus the lender must first sue you), foreclosure in Virginia is nonjudicial. That means that your mortgage company can simply file a notice of default then schedule a foreclosure auction. In Virginia, the only sure-fire way to stop a scheduled foreclosure auction is by filing a Chapter 13 bankruptcy. Foreclosure defense lawyers and bankruptcy lawyers are basically synonymous in Virginia.

Chapter 13 bankruptcy stops foreclosure and allows you to propose a repayment plan. If confirmed by the court, your mortgage company must accept your modified payment schedule. Some homeowners are able to exit bankruptcy just a few months after they file because mortgage companies frequently offer modifications once a Chapter 13 repayment plan is confirmed.

Foreclosure defense lawyer in Maryland

Maryland foreclosure is very similar to Virginia because Maryland is also a nonjudicial foreclosure jurisdiction. Maryland foreclosures take slightly longer than Virginia foreclosures, but still happen much more quickly than foreclosures in Washington DC.

You have loss mitigation options if you default on your mortgage in Maryland, but those options narrow over time. Mortgage lenders in Maryland have no legal obligation to modify your mortgage, but if you attempt modification early, your chances are greatly improved. Maryland foreclosures can take as few as 60 days. When time is tight and an auction has been scheduled, you must stop the foreclosure by filing a Chapter 13 bankruptcy.

Call us now to talk to a foreclosure defense lawyer

Lee Legal has been representing homeowners facing foreclosure since 2004. We offer free consultations and will assess all of your options. Call us today if you need a foreclosure defense attorney.

Whataboutism (and its counterpart bothsidesism) is much in the news lately in the context of our partisan national politics. But the strategy is older than logic itself. The Latin term for the logical fallacy of is tu quoque, or “you also.”

Father: You should stop smoking. It’s bad for your health.
Son: But you smoked for 40 years.

Whataboutists do not try to address factual assertions, and neither accept nor refute an opponent’s position. Whataboutism is a shoddy litigation tactic and cannot take the place of counterclaims in the development of a sound litigation strategy.

There are no substitutes for well-developed counterclaims

Whataboutism is no substitute for well-developed counterclaims. A counterclaim in litigation offsets or directly addresses the claims of an adversary. Counterclaims can also be entirely different, but related claims, in the same the litigation. Or counterclaims can bring in third parties to the litigation. Counterclaims are a vital component of a strong defense strategy.

Whataboutism, on the other hand, cannot take the place of well-developed counterclaims. Instead, it belongs in the category of ineffective strategies that includes tit-for-tat and “I know you are, but what am I?”

Moreover, whataboutism introduces easily-detectable and potentially damaging red herrings into litigation. It also tends to lend itself to conspicuous and counterproductive ad hominem accusations.

There are no perfect litigants

Very few, if any, litigants enter the courtroom with perfectly clean hands. Most claims have counterclaims, and most defendants have valid defenses. Most plaintiffs are imperfect, because nobody is perfect. There are no perfect litigants.

Courts are tasked with making factual findings and balancing the equity of the parties. Judges and juries alike will see through and discount whataboutist arguments. But properly established counterclaims may not only vitiate a plaintiff’s claims; they may also give rise to liability themselves. Whataboutism can never do this.

Avoid whataboutism and advance your counterclaims instead

Whataboutism signals an immature, underdeveloped defense strategy. It may be tempting to answer claims with, “But what about . . .?” Resist the urge. Instead, first attempt to directly address the claim through well-grounded defenses. Disproving the factual veracity of a claim goes much further toward undermining that claim than does introducing irrelevant (even if related) whataboutist countercharges.

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.