After providing advice to Mark regarding the tax consequences of his cancellation of indebtedness, you advised Mark to consider filing for bankruptcy to avoid similar problems on properties B, C, and D.Accordingly, Mark consulted with a bankruptcy attorney and concluded that the best way to get out of the situation he was in with the least amount of damage to his financial profile and credit was declaring bankruptcy.

Mark, generally a financially sensible man, did not have much in unsecured debts.He paid off all credit card balances and closed his unsecured lines of credit before the bankruptcy proceedings.The only unsecured debt he had going into bankruptcy was his federal student loan with a balance of $9,713, which, by operation of federal law, is not dischargeable in bankruptcy.After Mark paid his revolving credit card balances, his asset and liability profile was exactly the same as it was before the short sale in March, except that he no longer had property A and the debt associated with it (both of which disappeared in the short sale).

Mark's objective in filing for bankruptcy was to get out from the unbearable load of the "upside down" rental properties, and to avoid the tax consequences of the cancellation of the debt encumbering those properties.He wished to keep all of his other assets and investments intact through the proceedings, if possible.In addition, Rental Property D was a local investment with some hope that its value would recover soon.Mark wished to keep this property through bankruptcy, if he could get a good settlement on paying off the remaining balance of over $140,000 encumbering it.

Accordingly, after filing the bankruptcy petition, Mark approached the lender on property D and was able to negotiate the loan down.In exchange for a cash payment of $25,000, the bank would release the title to this property and forgive the balance of the loan.Mark made the 25,000 by borrowing the portion he did not have in cash from his sister, to be repaid after the dust settled from the bankruptcy.The Bankruptcy Court approved the plan and it was finalized on June 30, 2018.The bankruptcy plan discharged the debt on Rental Properties B and C, granting title on those properties to the lender.The Court also discharged any unpaid balance of the loan on rental property D, while Mark retained his title to that property free and clear.Mark was able to keep all of his other property free from any creditor's claims, but subject to any liens created by the debt encumbering those properties that he retained.The summary of the debt balances that Mark was able to free himself from is as follows:

Adjusted Subject to Property FMV Basis (Debt) Rental Property A 93,745 228,500 150,914 Rental Property B 97,000 172,150 200,371 Rental Property C 37,275 107,430 107,428 Rental Property D 150,000 96,251 140,679 Retirement Account ($401(k)) 450,000 Personal Residence 350,000 405,000 352,154 Investment in Land 3,500 85,000 3,814 Vangaugh Mutual Fund 7,300 21,408 Bells Farvo Mutual Fund 2,000 13,085 Stock Portfolio 5,488 12,540 Series I Treasury Bonds 6,350 6,000 Other Personal Property 2,000 10,000 Interest in Real Estate partnership 10,000 26,968 Cash on hand 5,792 5,792 Automobile 11,000 19,130 Student Loans 9,713 Totals 1,231,450 1,209,254 965,073 Property Rental B* Rental C* Rental D Total Loan Balance Bebre Discharge 200,371 107, 428 140,679 448,478 Proceed to Lender 97,000 37,275 25, 000 159,275 Loan Balance After Discharge * For properties B and C "proceed to lender consists of the fair market value of the property relinquished