Tax debt can seem like a road block

Ashley F. Morgan Law, PC helps many people with their debt issues. We pride ourselves in being able to help individuals find the best solutions for their individual problems. Our firm often helps people address their traditional debts, such as credit cards and loans, through the bankruptcy process. We also help people with tax issues through standard tax resolution options, such as payment plans or offers in compromise directly with the Internal Revenue Service. But sometimes we are able to handle all their debts through a bankruptcy. We understand dealing with taxes can be stressful, which is why we want you to know about all potential options.

Most people believe that taxes cannot go away with bankruptcy. There is only some truth to that idea. Some tax debt, such as trust fund taxes, cannot be discharged. Other taxes, such as income taxes, may be discharged if certain conditions are met. For the tax to be potentially dischargeable, the clients needs to have filed the taxes on time (or close to on time). Additionally, the taxes need to have been due three years before you file for bankruptcy, filed at least two years ago and 240 days since the taxes were assessed. There can also be no allegations of fraud related to the tax debt. Make sure to review your situation with an experienced bankruptcy attorney. Timing is especially important with tax issues; last thing you want is to file a few months or days early.

There are certain benefits to managing tax debt through bankruptcy. The most important benefit is that there is one process that is potentially managing all your debt issues.

Chapter 7

A Chapter 7 can help you wipe out unsecured debt and dischargeable tax debt in one quick and efficient process. The downside is that if there are any non-dischargeable taxes, they will remain after the bankruptcy. This option is often best for individuals with older tax debt that now have managed to owe little or receive a refund in recent years.

Chapter 13

A Chapter 13 allows for a three to five year payment plan to manage all non-dischargeable taxes and will result in a discharge of the dischargeable debts that were unpaid. Additionally, the bankruptcy code allows for a little more flexibility for allowable expenses when calculating a payment plan. The court reviews your plan to determine what is reasonable. The IRS follow their allowable guidelines for each county fairly closely.

The downside to a Chapter 13 plan is that it requires all priority tax debt to be paid in the plan, in addition to all other traditional Chapter 13 requirements. So, if you can pay something over the course of your plan, but it is not enough to satisfy the priority taxes, you will not be allowed to utilize a Chapter 13 filing. This option is often best for individual with low to moderate tax debt and decent income. Additionally, if you have higher than average secured debts, such as cars and homes, the bankruptcy court will take those factors into consideration unlike the IRS.

Tax Resolution Plans

A tax resolution payment plan can allow for other perks; the plans are for up to six years, which is longer than any bankruptcy option. These plans are agreements direct with the IRS, which means there is no public record of the agreement. This agreement would result in no public notice regarding the tax issue, unless the tax debt was significant enough or old enough that a tax lien was filed in the land records against you and all of your property (both real property and personal property).

Additionally, some plans can be as low as $0 per month, if the IRS determines you fall into the category of currently non-collectible. This means that you do not have any disposable income under their standards. However, their guidelines are more strict, as discussed above. But, if you have additional outstanding tax debt, a tax resolution does nothing to help manage those additional  debts. This option is often best for individuals with little to no additional debt or that have a substantial amount of recent tax debt or non-dischargeable tax debt with limited income.

Combination of Bankruptcy and Tax Resolution

Finally, we sometimes use both a bankruptcy and tax resolution to achieve the optimal results for our clients. Chapter 7 can help clients get rid of their unsecured debts, surrender any unwanted secured debt, and get rid of any dischargeable tax debt. We then follow the bankruptcy discharge with a tax resolution payment plan. This plan takes into consideration what the client is able to pay. Our firm often uses this debt management option with clients with higher incomes and substantial tax debt. The substantial, non-dischargeable taxes may help a high income individuals qualify for a Chapter 7 who might not otherwise qualify for a discharge.

By offering our clients bankruptcy and tax resolution options, we are able to fully explain all options to our clients ensure they are making the best choice. If you are experiencing financial difficulties of any kind, please let us know. Schedule an appointment to talk to one of our attorneys about all your options. Our experienced attorneys can review your situation, and discuss all potential benefits and drawbacks to each option. We can be reached at 703-880-4881.




Attorney Ashley F. Morgan is a Virginia licensed attorney. She has been helping clients manage various types of debts for years. Ashley focuses on helping her clients finding the ideals solution to their debt problems. Attorney Arthur Rosatti is a Florida licensed attorney has extensive experience dealing with the IRS and negotiation payment plans and settlements. He understands having tax debt and dealing with the IRS is stressful. He strives to make the process as stress free as possible. Both Ashley and Arthur are available to review your debt situation; they always collaborate on cases to ensure that their clients are receiving the best advice possible.

Bankruptcy basics and bankruptcy options.

Many people fear bankruptcy because it means they will lose everything, or they do not want to file because someone might find out that they filed, or the client believes it is an admission of failure. These are not always correct. When someone comes into our office we try to let them know bankruptcy is not as big of a deal as they think. It is a legal and financial decision that must be taken seriously, but it has a lot benefits.


Different Types of Bankruptcy

The bankruptcy court is there to help the “honest but unfortunate debtor.” There are different bankruptcy chapters to fit different people’s needs. Some cases we see are for people that are a few months or years behind on a mortgage, or a few months behind on a car payment.  In other cases you just overspent and you can’t catch up. Or even, perhaps, you just went through a difficult divorce and cannot afford your expenses anymore or have crushing medical bills. Bankruptcy can often help your mange your debt. There are four chapters: Chapter 7 (liquidation), Chapter 13 (restructuring for wage earners), Chapter 11 (restructuring for businesses or individuals with high debts), Chapter 12 (restructuring for farmers and fishermen).  Most of our clients file a Chapter 7 or a Chapter 13. Depending on your situation, one of these bankruptcy options may help you achieve your goals.

Chapter 7

A Chapter 7 is usually what most individuals think of when they hear the terms bankruptcy. It is a fairly quick process (three to four months) and it wipes away most unsecured debt and can relieve your obligation to pay secured debts. Any liens remain on the property, which means creditors can still foreclosure or repossess the collateral if you are not current. You can qualify for Chapter 7 in one of two ways. The first way only requires that your household income is below the median for the state. The second way requires what is called the Means Test. This “test” takes your income and reviews it to see if you have any disposable income at the end of the month after taking out allowable expenses. The court allows for certain actual expenses, such as your taxes, your car payment, and your mortgage payment. Then it allows deductions for other allowable expenses, such as the IRS standard for utilities, food, etc. If, after all the allowable deductions are taken out, only a small disposable income remains, then you are permitted to file a Chapter 7.

The reason a Chapter 7 is called a liquidation is because the court will take non-exempt assets and sell them to help pay off your debt. The Court assigns a Trustee to your case to represent your creditors to review your situation and determine what assets are non-exempt. Non-exempt means that there is not a law that allows you to keep the property. Important exemptions in Virginia include: 100% protection for qualified retirement plans, 100% protection for wedding/engagement rings, and $6,000.00 equity in a vehicle (per person), $5,000.00 wildcard exemption for any cash or cash like assets such as (such as money in the bank or equity in a home). Most of my clients do not have any non-exempt assets and after four months they get their discharge and their case closes. If there are non-exempt assets, the Debtor has the choice on whether he or she wants to file a Chapter 7 bankruptcy and surrender those assets or consider filing a Chapter 13 bankruptcy.

Chapter 13

A Chapter 13 is called a wage earner plan. This type of bankruptcy is for those individuals who have steady income. We use a Chapter 13 when individuals have too high of income to qualify for a Chapter 7 or have assets they could lose in a Chapter 7. The major benefit of a Chapter 13 plan is that you get to keep all non-exempt assets because you pay out the value of those assets in your plan. The plans are usually three to five years, which vary depending on your income. The plan requires that you make regular payments to the court during the life of your plan; at the end of your plan your remaining dischargeable debt is discharged. Some of our clients pay 100% back to all creditors. Even our clients that pay 100% back will often benefit from bankruptcy because the case will freeze your unsecured debts and stop them from incurring more interest. We have other clients who pay between 1% to 99% of all debt in their plans, and then we even have what we call a 0% payout plan. The 0% plans are Chapter 13 cases where you have some debt that is secured (cars and houses) or prioritized (non-dischargeable taxes, child support arrears, etc.) over other unsecured debt, and your plan pays the secured debt and the priority debt, but nothing to your unsecured creditors. One of the most common reasons for a Chapter 13 is to stop a foreclosure and then allow the debtor time to catch up on the arrearages. Sometimes we even use a Chapter 13 to help with student loans when you need to temporarily lower your payments.

If your plan is anything less than 100% the court will review your income every year to see if there is an increase, which means they may require you to pay more in. Additionally, if you get a tax refund or inheritance over the next few years, you will turn over the funds over to the Court.

There is a limit on the amount of debt you can have and be in these plans. These limits are unsecured debts of less than $394,725 and secured debts of less than $1,184,200, which will be updated as of April 1, 2019.

Chapter 11

A less common option for bankruptcy is a Chapter 11. This type of bankruptcy usually is only an option for an individual when an individual cannot do a Chapter 7 and has debts over the Chapter 13 debt limits. Businesses also do Chapter 11 to restructure their business. When you hear about major companies filing bankruptcy (such as Toys ‘R’ Us or Sports Authority), they are usually filing Chapter 11. The major benefit of a Chapter 11 is that your repayment plan can be over the course of more than 5 years. However, they are cost prohibitive. It is an expensive and complicated process.

Chapter 12

The last common bankruptcy is a Chapter 12, which is a restructuring of debt for farmers and fishermen. This type of bankruptcy is very similar to a Chapter 13, but provides more flexibility in the payment structure. This is because the court takes into account the seasonal nature of the businesses.

Can People Find Out I Filed Bankruptcy?

As for people finding out that you filed bankruptcy, it may happen. It is not published in the newspaper and notice is not mailed out to family and friends (unless you owe them money or have a joint debt with them). It is a public court filing that can be looked up, but so this can also be said about divorce, collection lawsuits, and foreclosure.

Sometimes people who were referred to our office for help with dealing with debt; they do not know that we help people file bankruptcy. After talking with us, they sometimes figure out that the individual who referred us, likely filed bankruptcy with us, too. Additionally, we have people from all walks of life who are considering bankruptcy, including people who are unemployed, individuals who have multiple properties, people going through divorce, individuals making six figures every year, business owners, and much more. We have other clients who start talking about filing bankruptcy with a friend only to find out the friend filed bankruptcy years ago. You just never know.

Bankruptcy is a Tool to Manage Debt  

As stated before, bankruptcy is a legal and financial decision. Congress included bankruptcy as an option in the law because they understand people need help managing their debts. It is not an admission of failure; it is a way of managing your debts and taking care of your financial situation.

For some, bankruptcy helps wipe away debt and allow a fresh start. For others, bankruptcy can help restructure your payments on various debts, such as your cars, student loans, IRS debt, personal loans, second mortgages, etc.   People often worry they make too much money to file bankruptcy, but there is usually an option out there that will provide some relief. Additionally, even if you make a lot of money, you may still qualify for a Chapter 7 if you have high secured debt payments (car, mortgage, etc.) or court ordered payments (alimony, child support, etc.).

If you will do whatever it takes to start over, perhaps you should consider bankruptcy.  It is not just for the poor and unlucky.  The code was written to allow various options to fit various situations. Bankruptcy is really just a tool in your financial tool box; if you are struggling with debt, it is at least an option you should look into.  For many of our clients, bankruptcy is also a tool to improve their credit, and it helps them get on track for an even higher credit score. We often tell prospective clients that they do not need bankruptcy, or that they have a variety of alternatives; it is not for everyone; it does not solve every financial problem.  But, you really should at least understand how it could benefit your situation. Consider a free consultation with my office; give us a call at 703-880-4881.





Ashley F. Morgan, Esq. is a Virginia Bankruptcy Attorney. She helps individuals and business file bankruptcy in the northern Virginia area. She has experience handling Chapter 7, Chapter 11, and Chapter 13 cases. She also understands bankruptcy is only one of many options available to debtors. She wants to help her clients review all potential options to determine what is the best option in each person’s situation. Instead of bankruptcy, Ashley has also helped negotiate settlements and payment plans for her clients when appropriate. Visit Ashley at her Herndon, VA office to discuss options to manage your debt.

There have been reports of up to 40% of student loan borrowers are not making their payments. While student loans can often feel overwhelming and overly burdensome, not making payments can create even worse problems. Not making your student loan payments will adversely affect your credit. When you are late making a payment, creditors will report this behavior to the credit bureaus and it will lower your credit score. A lower credit score can result in difficulties in opening new lines of credit and higher interest rates when purchasing a home or car, etc.

If you do not make your payments, the student loan companies have other ways of collection from you. Federal student loan companies have the ability to start garnishing your wages and bank accounts without a judgment. Private student loan companies do have to go to court to obtain a judgment, but they can also start garnishing your wages or bank accounts if you are delinquent. A garnishment allows a creditor to seize all the money in your bank account (up to the amount owed) or take a percentage of every paycheck until the debt is satisfied. This often can put even more of a financial strain on an individual than making the normal payments.

Student loans also usually do not go away with bankruptcy. While bankruptcy can help get rid of your credit cards and medical debt, student loans will not be discharged unless you meet very specific circumstances. A bankruptcy attorney can review whether you might be able to discharge your student loans, but it does require a lot more expense than a traditional bankruptcy and it is often left to the discretion of a judge to determine whether you meet the necessary criteria to discharge. Right now the required criterion for discharging your student loan debt varies depending on where you live and is a very high burden.

If you do find yourself in a difficult situation, and cannot make your normal payments, there are options out there.

Contact your lender and see what options are out there.

If you are in a temporary situation when you cannot make your payments, possibly due to any reason including loss of a job or a health issue, lenders will sometimes work with you. If you contact your lender and explain the situation, they may be able to give you a lower payment for a time period or be able to offer you a deferment or forbearance (where you stop making payments for a certain period of time). Often these options are at the discretion of the lender, but if you need some breathing room, it cannot hurt to ask. The benefit of being in a deferment or forbearance is that even though you are not making payments (or less than a full payment), your lender will still report your loan as current. This ensures your credit will not be negatively impacted by the reporting of a late payment or delinquency. The downside to lower payments or not paying for a time period is that it is usually only for a limited amount of time and your interest will still be accruing. When you get back to making your payments, the payment maybe higher or you might be paying for a longer period of time.

Additionally, if you are disabled and/or receiving Special Security Disability, you may be able to apply for another type of forgiveness. This is an administrative process and is only a viable option if you will not be able to work for the foreseeable future.

There are various repayment options out there.

When your federal loans come due, your loan payments will automatically be based on a standard ten-year repayment plan. However, there are payment options for federal loans that spread out your payments over more years or base your payments on your income. Depending on what your monthly income is and when your federally guaranteed loans were taken out, you could qualify to have your student loan payments capped at 10%, 15% or 20% of your discretionary income. If your income is low enough, your payment could be $0/month. However, you do have to reapply for the income-driven programs every year and submit documentation of your current income so the payment can be recalculated. After payments for 20-25 years (depending on the plan) on an income-driven plan, the remaining balance is forgiven. The downside to these income based programs is that any remaining debt that is forgiven will be taxed as income. Contact your student loan provider for more details. Also note that for most repayment plans, you do have to consolidate your loans and that can take a few months.

While the income-driven plans are only for federal loans, some private lenders do have other options available. Again, if you are having trouble making your payments on your private student loans, your best course of action is contacting your lender and asking about other repayment options.

If you work for a government entity or certain nonprofits, you may qualify for Public Service Loan Forgiveness (PSLF).

Under PSLF, if you work full time for a qualifying employer for ten years AND make 120 on-time monthly payments, the remaining balance of your federal loans will be forgiven. These payments are usually made in conjunction with one of the modified repayment plans offered by the student loan companies because the traditional repayment of student loans occurs over a ten-year period. The benefit for this program is that any remaining balance on your student loans that is forgiven under PSLF is not taxed.

As a last resort, bankruptcy may help buy some time or help with other debt.

While you cannot easily discharge your student loans in bankruptcy, there are options under the bankruptcy code to help find a manageable payment. With income-driven plans, your payment is based on a percentage of your income. These are often the best options available and can really help those with substantial amounts of student loan debt. However, this option is usually not available to those with private student loans. Also, if you have to make substantial payments to other creditors, sometimes even the income-driven payments feel overwhelming. Bankruptcy is an option, but does help everyone.

A Chapter 7 might be an option for those who cannot pay their student loans because of a substantial amount of other debt. A Chapter 7 can help those who qualify wipe away other unsecured debt, such as medical bills and credit cards. A Chapter 7 can also allow you to walk away from a secured debt, such as a car or a house, without having to worry about any deficiency. There are numerous advantages to a Chapter 7, but also some negative affects as well. If you are experiencing substantial hardship due to significant debt and cannot make your student loan payments, then you should consult a bankruptcy attorney. For example, after a major medical procedure, often individuals have trouble handling their payments to the doctors and to the student loan companies. An attorney can help examine your situation and determine whether you could potential benefit from filing. An attorney will also help you determine whether you qualify for this options.

If you have private student loans, and those lenders will not work with you, then you have an option of a Chapter 13. A Chapter 13 is a repayment plan over the course of three to five years. This options does require steady income during the course of the plan, but all creditors are required to participate in this repayment plan or they receive nothing during the course of the plan. Your plan payments are approved by the court, and the amount is based on your income and expenses that the court determines are reasonable. Your plan may pay unsecured creditors anywhere from 0% to 100%, it just depends on what your payments will be. Certain debts, such as tax debt, past due mortgage payments or arrearages on a car, must be paid during your plan. After your plan is complete, any of your unsecured debt (other than student loans and a few other limited exceptions), such as credit card, medical bills, payday loans, etc., will be discharged in accordance with your plan. Your student loans will remain, but the benefit of a Chapter 13 is that it provided you with time to find a better paying job or handle the rest of your debt without the risk of the student loans coming after you. There are various downsides to a Chapter 13. For example, the court will review your income during the course of the bankruptcy to determine if you could potentially pay more to creditors. Similarly, any increases in income or bonuses may be required to go to creditors if you are not paying them in full. For some people, a bankruptcy means the student loan companies are off their backs for a few years and that is enough reason for them. However, you should review all options available before considering bankruptcy to handle your student loans. Talk to a bankruptcy attorney if you believe bankruptcy might help your situation. The attorney will be able to help breakdown whether a bankruptcy might be beneficial in your situation.

There are many options out there for repayment and a lot of information. If you have any questions about what options apply to your situation, your lender is a great place to start. You also need to be carefully of the scams that try to take advantage of vulnerable and desperate debtors. There are many sites that look like legitimate sites or advertise settlements for student loan accounts or debt forgiveness. Often the offers that appear too good to be true are not real. If you are looking for real information about student loan and the repayment option, be sure you on the U.S. Department of Education’s website.



Ashley F. Morgan, Esq. is a Virginia Attorney. She helps individuals and business file bankruptcy in the northern Virginia area. She also understands bankruptcy should be your last option. She wants to help her clients review all potential options to determine what is the best option in each person’s situation.



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Scrabble letters of bankrupt

Many people walk into my office looking for advice about bankruptcy. Often, major life events drive people to consider bankruptcy, such as divorce, significant illness, foreclosure, etc. Foreclosure is an especially interesting reason to consider bankruptcy because it provides options to either limit liability and/or help handle any arrearages. It really can help those who are in default with their mortgage; however, bankruptcy is not always the only option.

Foreclosure can affect anyone. Maybe you were the perfect borrower; you made all your payments on time, even prepaying a little every month. Or maybe you had trouble making your mortgage payments, but you worked two jobs, got renters in your house, and did everything in your power to make the payments. Your payments were sometimes late, but never more than 30 days. Nonetheless, one day, you lose your job, you get sick, you are in a car accident, or something else happens and you cannot make your payments. You get one month behind, then two, and then a few more. Finally, a notice from your lender appears in your mailbox – your account is being referred out for foreclosure.

Most lenders only start the foreclosure process when you are three months behind or more. If you are approaching three months or more, then you really need to consider whether you will be able to bring your account current or if there any other options available to you. In some states, the foreclosure process is slow and can take months or years. In other states, after the foreclosure process starts you only have two months. For example, in Virginia, the foreclosure can occur in as little as two to three months after you get notice you are in default. Being proactive with your situation can help alleviate the stress and panic. However, if you have not considered your options prior to getting notice from your lender, then you should immediately figure out a plan and start talking to the right people. You do have various options, and it is important to understand them.

  1. Seek a loan modification with your lender.

Lenders can sometimes understand that life happen. As a result, from time to time you can get them to work with you. For example, you lost your job and could not make your mortgage payment for six months, but now you have a new job. You have no problem making your mortgage payment going forward but cannot quickly pay off the money you are behind (the arrears). A modification can potentially spread your arrears over the course of the life of your loan or potentially tack them on to the end. For another example, maybe you did not lose your job, but your hours at your job have been cut. You can still make a mortgage payment, but not the full mortgage payment each month. A modification can sometimes lower your interest rate and potentially lower your payment.

A modification may seem like a miracle, and for some it is. Often it is a great option when you can make payments, but need a little help either with your payment amount or arrearages. The first step in getting a modification is often talking to your lender and giving them a heads up about the situation. A modification is at the sole discretion of your lender – they do not have to offer you one and they do not have to give you one. But, it cannot hurt to try and often it is beneficial for them as well. Your lender will ask for significant amounts of information and documents. Make sure you get the documents to them as quickly as possible.

Beware of the companies out there that advertise offering modifications services. Many of these services are scams. There are some individuals and companies that are legitimate and can really help with the process, and even make the situation easier for you. If you want/need help with the modification process make sure you find a legitimate company. Ask people for recommendations and search the web for reviews.

  1. File Chapter 13 to help repay arrearages.

If a loan modification does not work, or is not an option at the time, there is the option of a Chapter 13. In a Chapter 13, the Bankruptcy Court basically helps you work out a repayment plan. This is for those individuals with regular income. The repayment plan allows you to make your normal mortgage payment going forward, while also making monthly payments to the court in order to catch up on your arrears. Plans are usually payments over the course of three to five years. The other benefit of a Chapter 13 is that it can help you handle all the rest of your debt, whether it is tax issues or credit card debt. The plan payments are approved by the court, and the amount is based on your income and expenses that the court determines are reasonable, as well certain assets. The plan must pay your arrearages and other important debts such as taxes. Your plan may also pay unsecured creditors anywhere from 0% to 100%, it just depends on what your payments will be.

The benefit to a Chapter 13 is that if you can afford to catch up over the next three to five years and bring your mortgage current, the bank has to accept the plan. A modification is optional for the lender, bankruptcy is not. However, the downside is that it is up to the court to determine whether your plan is feasible. For many, they make expect to be making more money a year or two down the road, but without proof (such as a contract or a guaranteed future lump sum payment), it is too speculative and the court will not allow approve your plan. An experienced bankruptcy attorney can help point out the pros and cons of a Chapter 13 in your situation, and whether a plan would even be feasible in your situation.

  1. Sell your home to take advantage of your equity.

If there is no way to bring your loan current, and there is equity in your home, you should consider selling it. A bank does not want to sell your home; selling your home means it costs them time and money. Also, if a bank forecloses, the possibility of you receiving any of the equity in the home in slim to none. If you sell the home, you can take that money and do what you want with it. Sometime, if you are actively trying to sell your home or you get a contract of the house, a lender will delay the foreclosure. But, just like a modification, it is in their sole discretion. Having an experienced realtor on your side in this situation is important. You need a realtor who not only knows how to act quickly, but who has also dealt with lenders before. An experienced realtor can present your situation to the lender in the most effective way and be your advocate.

If there is no equity, a short sale may be an option. This allows you to sell your house for a loss (and not pay off the entire mortgage). There can be tax consequences to a short sale and the lender may still come after you for a deficiency.

  1. File Chapter 7 to stop to limit liability and stop the foreclosure.

If there is little or no equity in your home, and you have decided you likely cannot save it, then you may want to consider a Chapter 7 bankruptcy. A Chapter 7 can stop a foreclosure and give you enough time to figure out where you want to go. The bankruptcy also discharges your obligation to pay on the mortgage. While the lien will continue to exist on the property, the bank will foreclosure against the property after the bankruptcy is done and you will not be responsible for any deficiency on the property. This can also help wipe away any other unsecured debt that you may have. Importantly, after a bankruptcy, a debtor only must wait two years to qualify for a mortgage. If you allow the lender to foreclose or you file bankruptcy AFTER the foreclosure then you must wait 7 years to qualify for a mortgage.

Not everyone can qualify for a Chapter 7. The bankruptcy court does consider your income and number of dependents in determining whether you can file a Chapter 7. If you cannot qualify for a Chapter 7, a Chapter 13 (that is discussed above) can be an option to surrender the house and limit any potential liability after the foreclosure. An experience bankruptcy attorney can help talk to you about the pros and cons of filing a bankruptcy and whether you could qualify.

  1. Do nothing and let the foreclosure happen.

Sometimes, if you have to deal with other issues in your life and you just want to walk away from the house, doing nothing is your best option. If you do nothing to stop the foreclosure, it will proceed. The bank will continue with its course of action and after the sale, the house will no longer be your responsibility. There are many factors to consider here. After a foreclosure, you cannot qualify for a mortgage for 7 years. You will also be liable for any deficiency on the house after the sale. You lender can try to collect this remaining debt by taking you to court or garnishing part of your paycheck or your bank account. Even considering these negative factors, sometimes doing nothing is the best option. However, usually you can only come to this decision after reviewing your entire situation and considering all options.

It is important to remember, all of these options should be considered in conjunction with each other. For example, if you are seeking a loan modification, you can still talk to a realtor so you have a backup plan. Similarly, you may also want to consult a bankruptcy attorney, so you can be prepared in case you cannot sell the house or the modification is unsuccessful. Similarly, a modification may also be an option while in a Chapter 13 or after a Chapter 7, it all depends.

Just remember, sometimes Plan A works, but if it fails and you do not have a backup plan (or two), you can find yourself out of luck. Up until the day of the foreclosure you have options – take advantage of that time. Talk to a bankruptcy attorney today. Timing can be an issue, especially if you have the option of selling your house or filing bankruptcy. Make an appointment with a bankruptcy attorney as soon as the possibility of foreclosure arises. Most bankruptcy attorneys offer free consultations, as does my office. Having more knowledge and information never hurts. Understanding all your options can only help you make the best decision for you and your family.



Ashley F. Morgan, Esq. is a Virginia Bankruptcy Attorney. She helps individuals and business file bankruptcy in the northern Virginia area. Ashley understands bankruptcy should be your last option. She wants to help her clients review all potential options to avoid foreclosure to determine what is the best option in each person’s situation.