- How to Manage Old Debt After Recent Supreme Court Ruling May 29, 2017
How to Manage Old Debt After Recent Supreme Court Ruling
It’s easier for old debt to haunt American consumers seeking refuge in bankruptcy, thanks to a recent ruling by the Supreme Court in Midland Funding, LLC v. Johnson (2017). I have blogged before about Midland Funding and their reputation for collecting on stale debts and debt that they may not even be able to prove that you owe. Unfortunately they are one of the largest debt collectors that are out there and now the Supreme Court seems to have no problem with some of their fraudulent practices. I discussed how to manage old debt on 1150AM KKNW in Seattle, Washington with Dr. James Gore on the New Urban Unlimited Show and you can listen to our discussion here:
The nation’s highest court said debt collectors can try to collect on expired debt through bankruptcy proceedings without running afoul of the Fair Debt Collection Practices Act (FDCPA), reversing a lower court’s decision. The case started when an Alabama debtor sued Midland Funding, LLC under the FDCPA for filing a proof of claim in Ms. Johnson’s chapter 13 bankruptcy case related a time-barred $1,900 credit card debt that was over 10 years old. In Washington state, creditors have 6 years to collect on a debt from the last account activity which is called the statute of limitations. The new ruling diminishes much of the liability collectors previously faced when filing bankruptcy claims for debt that passed a state’s statute of limitations. The Eleventh Circuit had ruled in a 2014 case that the strategy violated the FDCPA, dissuading many debt collectors from the practice.
Because of the Supreme Court ruling in this case, bankruptcy attorneys and consumers will no doubt see more stale claims being filed in the bankruptcy court. If consumers don’t know that they have the right to object to the claims, they will be required to pay more into a Chapter 13 payment plan than otherwise needed.
The decision also emphasizes how careful consumers should be when it comes to old debts. Creditors and debt collectors can try to collect expired debt forever by calling or writing letters, but there are laws in place to protect consumers. Here’s what you should know about old debts to use the law to your advantage
Know the statute of limitations when collecting on old debt: While the ruling allows debt collectors to try to recoup expired debt in bankruptcy, they still can’t file a lawsuit against you for the debt. Each state determines how long a creditor or debt collector can sue for an expired debt, which can range from three to 10 years. The length depends on the type of debt and type of contract. The clock starts from your last account transaction. In Washington state the statute of limitations is 6 years.
Get verification of the old debt: If a debt collector calls or sends a letter to collect an old debt, you should respond in writing and ask to be provided verification to make sure the debt is yours with the date of last payment. You will also want to ask for proof that the debt collector has standing to collect on the debt. Your request for verification must happen within 30 days of getting a written notice of the debt. Debt collectors can’t collect debt until they provide verification. If the debt is outdated, you can use the written verification as proof of its expiration if the collector continues to come after you.
Stop annoying calls and letters trying to collect the old debt: By law, debt collectors must stop unwanted telephone contact if requested by the consumer in writing, no matter if the debt has expired. Document when you make your request. Specifically you should ask not be contacted again regarding the debt in any manner. Send by certified mail and get a return receipt. Keep a copy of the letter and return receipt for your records just in case the debt collector continues to call. This could be grounds for a FDCPA violation and statutory damages to you in the amount of $1,000.
Don’t ignore a court summons related to the old debt: You should never ignore a summons and complaint. Doing so could result in a default judgment against you and then attorney fees, interest, and penalties could be tacked on. Some debt collectors still try to sue for outdated debt as a pressure tactic. If the debt is time barred, you can use this as a defense to win your case. If you ignore the suit, you could end up having your wages or bank accounts garnished, not to mention a judgment showing up on your credit report.
If you pay the old debt, make you sure you get documentation: If you have decided to pay the old debt or negotiate a settlement, make sure you get the terms in writing. The agreement should state that the amount settles the entire debt and you are released from any further obligation. Never send a good-faith payment because it could restart the statute of limitations clock and allow the debt collector to sue you. Keep in mind however, that you making a payment on the expired debt will validate any negative reporting on your credit report, although the debt would be updated to satisfied, or settled for less than the full balance, rather than delinquent. However it could stay on your credit report for another 7 years.
Know how the old debt affects your credit scores: Even if a debt is past the statute of limitations, it can still show up on your credit report and hurt your credit score. Negative items don’t fall off credit reports until after seven years from the date of your last account transaction. That means although creditors may be time-barred from suing to collect your credit-card debt after only six years, the debt can remain on your credit report for another year. Making a payment can validate a debt and cause the debt to be reported as settled or settled for less than the full balance for another 7 years. If you are going to pay the debt, you should first try to ask for a “pay for deletion” where the debt collector agrees to delete the item off your credit report entirely. Many debt collectors may agree to this If you pay them in full, while others will just refuse to take you up on this offer.
Object to the old debt in bankruptcy: If you’re filing for Chapter 7 or 13 bankruptcy, review each proof of claim from every creditor. In chapter 13 case you can monitor your claims activity online. You can challenge a claim for many reasons, including expiration, by filing a written objection with the court. A judge will determine if the claim is valid. I would expect we should be seeing more time bared claims filed in the future
If you live in Washington State and are looking for assisting in managing your old debt, give Symmes Law Group a call at 206-682-7975 to speak to a debt relief attorney and learn about your options.
- Can an Attorney Help You Buy and Sell Real Estate? May 3, 2017
Can an Attorney Help You Buy and Sell Real Estate?
Yes! In fact this can be a way you can save a significant amount of money on your real estate transactions. I had the opportunity to discuss whether an attorney can help you buy and sell real estate on 1150 AM KKNW which you can listen to here:
Do I Have to Hire a Traditional Real Estate Broker to Sell My House?
The short answer is no you don’t have to hire a real estate broker to sell your house, but like any situation there are benefits and drawbacks either way you go.
Can I Hire an Attorney to assist with a Real Estate Transaction?
Yes. The web has transformed the way people buy and sell real estate. Today there are not many secrets to buying or selling a house. Most people just need an experienced professional to assist in negotiating and closing the deal, and they should not have to pay a full commission. We work for a 1.5% commission that is less – sometimes WAY less – than what you would pay a typical agent.
What if I Just Want to Make an Offer on a house without an Agent?
A lawyer can assist with this, however most buyers agents are paid by the seller at closing, unless the transaction is a non MLS transaction in which the seller states the buyers agent will not be paid by the seller. Therefore in an MLS transaction an attorney can rebate back to the buyer a percentage of the commission or charge a flat fee for each offer drawn up on behalf of the client.
What are the professional costs associated with a Real Estate Transaction and How Much Can I save by Hiring a Lawyer?
Most residential real estate transactions in Washington involve licensed real estate brokers, in which a buyers broker is paid 3% commission and sellers broker is paid 3% of a commission. These brokers are usually part of the Multiple Listing Service (MLS) in which MLS forms are used and the language in the forms are standard and required if listing a property on the MLS. Brokers are allowed to fill out the forms but not make changes to the forms.
If you use an attorney, they can use their own forms or amend the MLS forms to whatever language they want to use which doesn’t require the standard commission fee’s be paid if the property is not listed on the MLS. Therefore your attorney could charge a commission of 1.5% instead of 3% or a flat fee and then state that the buyers broker has to be paid by the buyer. This would create a significant savings for a seller even if the seller has to contribute something to the buyers agent which can be negotiated.
Why Hire a Lawyer Instead of a Real Estate Broker?
(1) In this crazy hot Seattle metro market just about everything is going fairly quickly and you could list as a FSBO non MLS or submit through an MLS directory or hire a lawyer who is also a broker to list on MLS which will get picked up by Redfin, Trulia etc. My take is that most active buyers are on Redfin constantly checking houses so the MLS is becoming less necessary, especially in the Seattle market.
(2) You could also always go MLS/Broker if you don’t get the price you want initially.
(3) The amount you could potentially save by not having to pay high agent fee’s most likely exceeds what an agent would increase the sale value by actively marketing the property. As an example you could save up to 4.5% and on a $700k house that is $31,500!
(4) You don’t need to list the property online as you already have a buyer lined up.
(5) A lawyer is better equipped to negotiate a short sale on your behalf should the need arise and deals need to be worked out with the bank as well as a buyer/seller so that the bank will accept less than they are owed if a property is underwater.
(6) A lawyer has much more formal education than a broker and in essence you are getting the benefits of having your own lawyer on a transaction as well as an agent to review for what most people is the largest purchase/sale they will make. In fact a handful of lawyers or both licensed attorneys and brokers.
(7) Additional home tours, staging, videos etc. and the more traditional broker services can always be added to any transaction at cost or for a flat fee, although most basic transactions would not include these services.
When would hiring a Traditional Real Estate Broker make more sense?
(1) You feel that your property would benefit significantly from the contacts of your agent in marketing and showing your property outside of what listing the property online would bring.
(2) You simply don’t have any time to deal with showing your property and don’t mind paying the extra cost for more hand holding, house tours and house staging throughout the buying and selling process.
If you live in Washington State and are looking for a Seattle attorney to help you save money when buying and selling real estate, give Symmes Law Group a call at 206-682-7975 to speak to a real estate attorney and learn about your options.
- Confessions of a Seattle Bankruptcy Attorney: 5 Myths About Filing Bankruptcy March 26, 2017
Confessions of a Seattle Bankruptcy Attorney: 5 Myths about Filing Bankruptcy
In every day life, nobody goes into a business venture or every day life thinking that they will have to someday talk to a Seattle bankruptcy attorney, however one unplanned event can sometimes send people and families on a path to bankruptcy. Most Americans would rather not have to file for bankruptcy however, most consumers simply don’t have a lot of room for error in their monthly budget for unplanned expenses.
The Federal Reserve reported in 2016 that 46% of U.S. families said they would have trouble paying emergency expenses of $400. And a 2015 MagnifyMoney survey found 56.3% of Americans have less than $1,000 in their savings account. This means there is not a lot of room for error and one emergency room visit or auto expense or accident could send a consumer down the path to bankruptcy.
In an effort to help consumers understand all options that are available, here are 5 myths about filing bankruptcy. You can also listen to the discussion on this topic I had on the New Urban Unlimited radio show on 1150am KKNW here:
1. Say “Goodbye” To All of Your Assets….
Filing bankruptcy doesn’t mean you’ll lose everything.
If you successfully file a Chapter 7 bankruptcy, the court will appoint a trustee and you will in most cases receive relief from your debts in 90 days from filing. The trustee is tasked with reviewing your assets to determine if any of them can be liquidated for the benefit of your creditors. Most assets are protected through bankruptcy rules call exemptions, but you should talk to an experience Seattle bankruptcy attorney to make sure you are not at risk of losing anything.
But not everyone is eligible for Chapter 7. Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), an individual must make below their states median income for their family size or pass the “means test,” which determines if, according to the government, that you have other expenses that would allow you to qualify for chapter 7 when you would otherwise be above your median income. If you are below the median income you do not have to pass the means test.
Chapter 7 bankruptcy is cheaper, easier and quicker, but it doesn’t always fit everyone’s needs.
In a Chapter 13 bankruptcy, an individual sets up a three- to five-year plan, depending on their income level, to repay their creditors. All debts are reorganized and consolidated, and the filer pays a chapter 13 trustee, who pays creditors. If you’re behind on your mortgage and want to keep the bank from foreclosing on your home during bankruptcy, a Chapter 13 can help you make up your bankruptcy arrears over five years. In chapter 13 bankruptcy, assets are not liquidated.
2. “My credit will be destroyed for life.”
Yes, a bankruptcy can stay on your credit for 10 years after you successfully file. But look at it this way — if you’re facing debts so high you’re considering bankruptcy, it’s likely your credit is already suffering. And it’s going to be pretty difficult to start rebuilding your credit if you’re burdened by a large amount of debt.
A large part of your credit score is looking at the amount of unsecured debt that you have at any given time. I you have maxed out all of your cards you will never be able to improve your credit while carrying the debt load. In many cases, those who file chapter 7 bankruptcy see increases in credit the moment they get a bankruptcy discharge order from the court. While having a bankruptcy on your credit is a negative item, it may not be as bad as having several negative items reporting on your credit every month and having a high debt load.
Clients often report that after filing for bankruptcy they wish they had gone through with the bankruptcy filing.
3. “I’ll never get approved for new credit again after filing bankruptcy.”
There’s no quick fix for having a bad credit score in most cases, but that doesn’t mean that you’ll never be approved for a new credit card or home loan again. In fact it is quite the opposite after filing bankruptcy.
Many of my clients receive offers for car loans and credit cards before we have to go to court, 30 days after the case is filed. That’s because credit card companies and auto dealerships market directly to people who have filed for bankruptcy. Many of these companies can obtain your information from a list obtained from the court since a bankruptcy filing is public record.
Credit card companies and auto dealers assume people who have gone through bankruptcy have no fiscal discipline, will rack up more charges and pay more interest. Companies also know that debtors cannot file a chapter 7 bankruptcy case again 8 years since the last filing which makes it likely they will make a profit on providing new credit.
To rebuild your credit, it’s a good idea to start with a secured card if you can’t get approved for one with a reasonable interest rate.
4. “Only my co-signer filed bankruptcy, so it doesn’t affect me.”
If you’ve co-signed a debt, and the other person successfully files for bankruptcy and has their debt discharged, creditors can still come after you for the full amount. This happens frequently with spouses, ex-spouses, parents and children.
If you’re divorcing your spouse and bankruptcy is a concern, you should consider taking a domestic support obligation rather than something like a property settlement so you will not be responsible for debt associated with the property, like a mortgage.
Domestic support obligations are debts in the form of alimony or child support and are not dischargeable under Chapter 7 or Chapter 13. If your ex-spouse has has filed for bankruptcy and were supposed to be liable for a debt that was discharged, you could always have the matter heard in family court if a creditor is now perusing you for a debt that your ex spouse was supposed to be responsible for.
5. “Any Seattle bankruptcy attorney will do.”
When looking for a Seattle bankruptcy attorney I recommend working with somebody who is local, experienced in bankruptcy matters and a good communicator.
You also want someone with experience in Chapter 13 cases, not just Chapter 7 cases as you will want to know all of your options, not those just associated with chapter 13.
When an attorney quotes a fee, make sure you understand what’s included. Some attorney will quote a low fee to get you in the door but may tack on fee’s later in the representation. The court filing fees are $335 for Chapter 7 and $310 for Chapter 13.
You will also want to check and see of your attorney will appear with you in court or send someone else and it is advised that your attorney be a member of the National Association of Consumer Bankruptcy Attorney (NACBA), as it shows your attorney is in touch with the latest updates in bankruptcy law.
Your attorney will ultimately be responsible for guiding you during one of the most financially difficult times of your life, so take your time and choose wisely. Cost should be just one of the factors you consider when hiring an attorney, as you should ultimately feel comfortable with your decision as this is the person you will be working with for the next 90 days in Ch. 7 or possibly 5 years in Ch. 13 bankruptcy.
If you live in Washington State and are looking for a Seattle bankruptcy lawyer to help you get out from under your debt, give Symmes Law Group a call at 206-682-7975 to speak to a bankruptcy attorney and learn about your options.
- Do You Feel Threatened By Debt Collectors? January 17, 2017
Have You Been Threatened By Debt Collectors?
If you feel threatened by debt collectors you would not be alone. A recent survey by the Consumer Financial Protection Bureau (“CFPB”) found that 1 in 4 consumers feel threatened by debt collectors. This is not surprising to me at all based on my experience in dealing with consumers who are facing debt collection combined with the amount of scams out there who make debt collectors look even worse.
I had the opportunity to talk about the recent survey by the CFPB on 1150AM KKNW on the New Urban Unlimited radio Show with James Gore this past weekend. Below you can hit play on the player and listen to our candid conversation.
The survey reported that 40% of consumers who were contacted asked the debt collector to stop calling them but to no avail. One pro tip is that if you really want a debt collector to stop calling you, you should send them a notice in writing telling them to stop calling you on the phone. Make sure the letter is signed and dated and provides your contact number and address. If the debt collector is a third party debt collector they would be bound by the fair debt collection practices act (FDCPA), and would be forbidden from contacting you by phone once the letter is received. It is important to note that they could still contact you via mail or potentially file a lawsuit against you to collect on the debt.
Debt collection is a multi-billion dollar industry affecting 70 million consumers who have or are contacted about a debt in collection. Banks and other original creditors may collect their own debts or hire third-party debt collectors. When they fail to collect debts on their own, they often sell these debts to debt buyers. The buyers may try to collect on these debts, or hire third-party debt collectors to do so. More than 6,000 debt collection firms are estimated to operate in the United States.
More consumers complain to the CFPB about debt collection than any other financial product or service. To date, the CFPB has taken several steps to improve the debt collection marketplace and study the industry. Since 2011, the Bureau has brought more than 25 debt collection cases against first- and third-party collectors. These cases allege violations of the Fair Debt Collection Practices Act, or unfair, deceptive, and abusive collection tactics that violate the Dodd-Frank Wall Street Reform and Consumer Protection Act. These cases have brought a total of $100 million in civil penalties against debt collectors, more than $300 million in restitution to consumers, and $4 billion in debt relief for consumers.
Here are the highlights of the CFPB survey:
According to the CFPB debt collection survey, about one-third of consumers – or more than 70 million Americans – were contacted by a creditor or debt collector about a debt in the previous 12 months. Consumers are most often contacted about medical and credit card debt. The CFPB survey also found that:
- Over one-in-four consumers report threatening contact: Twenty-seven percent of consumers approached about debt said they felt threatened by the conduct of the creditor or collector who most recently contacted them. Debt collectors are generally prohibited from tactics that tend to harass, abuse, or oppress consumers.
- Three-in-four consumers report that debt collectors did not honor a request to cease contact: About 40 percent of consumers contacted about a debt in collection said they asked at least one debt collector or creditor to stop contacting them. Of these consumers, three-in-four said the debt collector did not honor the request to cease contact attempts.
- More than half of consumers report incorrect contact for at least one debt: Fifty-three percent of consumers contacted about a debt in the year prior said at least one collection effort was mistaken in some way. These consumers reported that the creditor or collector sought the incorrect amount, that the debt was not owed, or that the person owing the debt was a family member.
- Over one-third of consumers report being contacted at inconvenient times: Thirty six percent of consumers contacted about a debt in collection said that the creditor or collector who most recently contacted them called between 9 p.m. and 8 a.m. Debt collectors generally cannot call at times they know to be inconvenient unless the consumer specifically agrees to it.
- Nearly 40 percent of consumers report that a debt collector attempted contact four or more times per week: Thirty seven percent of consumers contacted about a debt in collection report that the most recent creditor or collector to contact them usually did so four or more times in a week. About 20 percent of consumers approached by debt collectors reported contact attempts by debt collectors usually four to seven times per week. Another 17 percent said a creditor or debt collector tried contacting them eight or more times per week.
- One-in-seven consumers contacted about a debt report being sued: Fifteen percent of consumers contacted about a debt in collection over the prior year report being sued. The share ranges from 6 percent sued among those contacted about a single debt to 35 percent sued among consumers contacted about five or more debts. About 75 percent of those sued do not go to the court hearing, which generally makes them responsible for the debt.
In addition to the debt collection survey, the CFBP also will publish a white paper which will shed light on the debt buying business, including online marketplaces which reveal that several accounts can be purchased for less than a $1. The new debt owner has legal rights to seek to collect the full amount of the original debt or to resell debts that are uncollected. Even more alarming is that these accounts contain personal information including social security numbers and put in the wrong hands can do serious damage to a consumer. The report indicates that payday loans and credit card debts are the most likely types of debts to be bought and sold.
If you live in Washington State and are dealing with a third party debt collector and have questions about it, give Symmes Law Group a call at 206-682-7975 to speak to a debt relief attorney and learn about your options.
- What Should I do With My Car if I Owe More Than it’s Worth? January 8, 2017
How Do I Deal With An Auto Loan That is Underwater?
One common issue that I see time and time again at an increasing pace is that consumers owe significantly more to a bank for a car than the car is actually worth. As it turns out, www.edmunds.com has actual statistics to back this up which show that 1/3 of all auto trade-ins involve cars in which the consumer owes more than the car is worth, otherwise known as being underwater. Making matters worse, car dealers are agreeing to take the car on trade-in and add the difference between what the car is worth and what is owed to the new car loan, which ultimately results in the consumer getting a new car that loses value the moment it is driven off the lot in addition to the underwater debt the consumers owed on their former vehicle. So now the consumer is left with a depreciating asset that they are not likely to pay off or gain the value to correlate to what they are spending. Don’t let yourself to fall into this trap.
I had the chance to talk with James Gore on his radio show on 1150 AM KKNW with regards how you can deal with an auto loan that is underwater and you can listen to the show here:
When shopping for a car loan you should not be spending more than you can afford and you should think about how much you will be required to spend on the loan on a monthly basis. You will want to secure the lowest interest rate that you can, which can be done by improving your credit score. If you are somebody who needs the latest and greatest technology, you should consider leasing a vehicle rather than taking out new loans on a depreciating asset which may drive you further into debt with nothing to show for it when it comes time to sell the car.
So How Can You Deal with An Auto Loan That is Underwater?
(1) One option is if you are considering filing for chapter 7 bankruptcy, you can simply walk away from your vehicle and the debt will be discharged with your other unsecured debts like credit cards and medical bills. And yes you would need to surrender your vehicle back to the bank. The good news is that you will qualify for a new auto loan that hopefully will not put you underwater, but it would most likely be at a higher interest rate than the average car loan.
(2) If you have decided to file for chapter 7 bankruptcy, another option for you is to consider having your attorney file for a redemption under section 722 of the bankruptcy code. Filing a motion to redeem an asset while in chapter 7 bankruptcy allows a consumer to cram down the amount you have to pay on the vehicle to the vehicle’s actual value. The catch is that you would have to pay the amount you owe in one lump sum to pay off the debt, but again that would only have to be for the actual value of the vehicle. There are companies out there that will give you a new loan for the actual value of the vehicle if you are not able to cover the balance. This is a good idea for consumers who have a vehicle that is worth significantly more than they owe and who are in need of a loan to cover the actual value of the car.
(3) If you don’t qualify for chapter 7 bankruptcy or are considering reorganizing your debt payments, you may want to consider chapter 13 bankruptcy. In a chapter 13 bankruptcy, consumers can cram down their car payments to the value of their vehicle through their chapter 13 plan. A chapter 13 plan typically lasts for 3-5 years, and if the consumers vehicle was purchased more than 910 days ago, they may be eligible to cram down the auto loan to the actual value. Of course in order to file for chapter 13 bankruptcy, you need to be able to afford your chapter 13 plan which will include your auto loan.
These are some of the most common tools at your disposal to get out from under an underwater car loan. If for whatever reason you fall behind on your car payments, you bank will most likely seek to repossess the vehicle. Timing on this can vary by lender, but in my experience, credit unions are the quickest on the draw. Once a vehicle is repossessed the lender will seek to auction the vehicle to recoup some of the funds that are owed to them. The consumer will then be on the hook for owing whatever is left on the balance of the loan minus the auction value. At this point your lender may file a lawsuit to collect these funds which can lead to a garnishment of your wages or bank accounts, not to mention negative reporting on your credit report the minute you go delinquent or get a judgment on your record. This of course would make it more difficult for you to obtain a favorable car loan in the future.
Now that you know what may happen if you don’t pay for your underwater auto loan, you can use the tools above to avoid anything negative from happening. For Example once you file for chapter 7 or chapter 13 bankruptcy, nobody can collection on a debt and you can redeem or cram down your loan to the actual value, or surrender your vehicle altogether and get out from under your underwater car loan.
If you live in Washington State and are considering filing for bankruptcy and have a vehicle in which you owe more than it is worth, give Symmes Law Group a call at 206-682-7975 to speak to an experienced bankruptcy attorney and learn about your options to become debt free.
- What to Expect When Dealing with Debt in 2017 and Beyond? November 19, 2016
What to Expect When Dealing with Debt in 2017 and Beyond?
Now that the 2016 election season has concluded and we have for better or worse a new President Elect in Donald Trump I wanted to look at how his policies may change how consumers and borrowers may act when dealing with debt issues in the next 4 years and beyond.
I had the chance to discuss the topic of what to expect when dealing with debt in 2017 on 1150 AM New Urban Unlimited Radio Show in Seattle which you can listen too by clicking play on the player below:
What will happen to Dodd Frank and Consumer Financial Protection Bureau (CFPB)
Mr. Trump has stated that he intends to get rid of the Dodd Frank Act or at least parts of it that came in to law in 2010 under President Obama to avoid another mortgage crisis and to tighten lending restrictions and hold lenders and debt collectors accountable for their actions. If the Dodd Frank act is stricken from law then lenders will be free to open up lending too many potentially unqualified borrowers. Once these borrowers can’t pay there is the potential that the CFPB won’t be around to hold in check the big banks and debt collectors who have caused significant harm to consumers. Just this year the CFPB has settled large disputes with Wells Fargo for opening bank accounts that nobody wanted and large debt collectors such as Midland Funding and Portfolio Recovery for unscrupulous debt collection practices.
If the CFPB isn’t around, the lending and collection industry could become the wild west once again and since lending will most likely increase to drive the economy, so too will bankruptcy filings of consumers who never should have taken out debt in the first place.
What Will Happen to Consumer Dealing with Debt Associated with Loan Modification Programs?
At the end of 2016, the federal governments homes affordable modification program (HAMP) will come to an end. This program allowed borrowers to lower their overall home payments to 31% of their gross income if they met certain requirements. With that said the governments home affordable refinance program (HARP) will still be available for borrowers.
So what does this mean for borrowers looking to get a modification from their bank? The first thing I would advise is to submit your modification application prior to the end of the year because in 2017 and beyond it may be more difficult to obtain a modification. This is because the bank will rely on their own in house programs to determine whether they want to give you a loan modification or not. This means they run their own net present value analysis and if it makes sense to give you a modification they will, but if it makes more sense to foreclose on your property they may choose that option. Therefore in 2017 I would expect to see more borrowing from lenders to cover mortgage payments which may result in more bankruptcy filings and less loan modifications being approved.
What will happen to Consumers dealing with Student Loan Debt?
Student loan debt is a major issue in this country and it is a bubble waiting to burst. Currently there is $1.3 Trillion dollars of outstanding student loan debt in the United States. Presently there are few options for borrowers to rid themselves of this albatross as student loan debt in most cases is not dischargeable in bankruptcy. In the 9th circuit we look to the Brunner test to determine dischargeablilty for bankruptcy which is a tough standard to meet. The current government offers numerous options for federal student loan debt such as Income Based Repayment (IBR) or Pay as You Earn (PAYE) to help lower the cost of student loans on a monthly basis and forgive the debt after a number of years (10 years if working in public Service), (20-25 years for everybody else depending on the age of the loans). The problem with this scenario is that if everybody pays the minimums on their debt for the required period of time, they still most likely will have a large tax bill to pay on the forgiven debt.
President Elect Trump hasn’t stated exactly what he is going to do to combat the student loan crisis but he has stated that he may lower repayment periods to 15 years while required 12.5% percent of discretionary income be paid into the plans. He hasn’t laid out any options to deal with private student loans which will continue to be a burden on consumers. With that said if consumers have a lump sum available to settle their private student loans, these lenders or associated debt collectors may accept less than the full balance on these loans.
Another option when dealing with student loan debt that Trump could consider is to make all new student loans private a keep the government out of the student loan business altogether. In my opinion this option would be a disaster as private student loans with no federal repayment options would leave borrowers struggling to pay on their loans and could force them to hire private companies to refinance the loans they are given, which in the end would benefit the banks and not the consumers.
Where do Consumers Go from Here when Dealing with Debt?
While am glad that the election season is finally over, I am concerned that the new regime and government may fail to protect and help the very people who got them into office. Mr. Trump’s background as a businessman seem to favor the fact that he will open up lending, have less regulations for consumers, lenders and debt collectors, while not addressing the $1.3 trillion dollar student loan crisis which will only cause more borrowing from consumers who are unable to make their monthly payments to student loan lenders and need to borrow from banks just to make ends meet. Unfortunately I foresee that America will be once again built up on consumer borrowing that will only benefit the big banks which may lead up to another crash.
While I hope I am wrong and that the new policies will benefit Americans in the long term and not just the short term, I am skeptical. Only time will tell and anything written in this article are just to be taken as my opinion and nothing more.
If you live in Washington State and are dealing with debt and have questions about it, give Symmes Law Group a call at 206-682-7975 to speak to a debt relief attorney and learn about your options.
- What Options are Available When Dealing with Tax Debt? October 21, 2016
Dealing with Tax Debt
A common question that consumers often want an answer too is how can I deal with tax debt? Tax debt can come in several varieties such as State tax debt, B&O taxes, payroll taxes from a business and personal federal and state income tax just to name a few.
I had the chance to discuss how to handle tax debt on 1150 AM New Urban Unlimited Radio Show in Seattle which you can listen too by clicking play on the player below:
This article will focus on what you can do with dealing with Federal consumer income tax debt. Federal income taxes can be some of the hardest debt to deal with, although there are options available to you to get you back on track. The worst thing that you can do is take no action and bury your head in the sand, so be proactive and education yourself about the options that are available to you which you can find below:
(1) Go on a payment plan with the IRS to Deal With Tax Debt
The first thing that you should do if you owe federal income taxes is to contact the IRS. The IRS is usually fairly reasonable when in allowing you to go on a repayment plan to pay back the debt you owe based on your current income. Consumers will want to make sure that all tax returns have been filed and will agree to file returns on time in the future. Consumers should be aware that there are currently scam artists out there who are frightening consumers on the phone into thinking they have unpaid tax debt. Consumers should know that the IRS will never call you. They usually send you a letter which details the taxes that you allegedly owe and your right to dispute any of the claims.
In general the IRS will accept a repayment plan on $10,000 or less over 36 months and $25,000 or less over 60 months. You will need to determine if you can afford these payments or if there may be better options available to you which you can find below.
(2) The next option that consumers can explore is an offer and compromise or going on non collectable status with the IRS to Deal with Tax Debt.
An offer and compromise is a term the IRS uses for settling a tax debt for less than the full balance. An offer and compromise can be difficult to obtain and you will need to show some sort of hardship as to why you cannot pay the full balance of the tax debt. In general the IRS will not accept an offer from a consumer if they believe the consumer can pay back the debt with a lump sum or in payments.
There are statistics that show that the IRS accepts only 25% or less of the offers they receive and applying for this program takes over a year to complete the review. The information that consumers need to submit includes 3 months of paystubs, bank statements, credit card, auto, and mortgage statements along with a hardship letter and a break down of household expenses. Taxes for the years you owe and the previous five years prior to filing the application will also be reviewed. There is also an application fee of $150 that needs to be paid.
As far as quailing for non collectable status, consumers have to prove that they have no ability to pay on the taxes and will need to submit proof to back up the claims. Usually this applies to people who have no source of income or just receive some sort of disability or social security benefits.
Therefore unless you believe you have a good chance of the IRS determining that you cannot afford a payment plan or lump sum option, applying for an offer and compromise or non collectable status may not be worth your time and the money you will have to pay a lawyer or tax professional to submit your application.
(3) Filing For Bankruptcy Could Eliminate Tax Debt or Allow for a Reasonable Repayment Plan
Filing for bankruptcy makes sense for those who are eligible to discharge federal income taxes, those who have other consumer debts that may be discharged in a bankruptcy filing or those looking for a repayment plan over 60 months when dealing with other kinds of consumer debt and federal taxes owed.
In general federal income tax debt may be dischargeable if:
a. You did not commit fraud or willful evasion.
b. It has been 3 years since the tax debt in question was due.
c. It has been 2 years since you filed the tax return associated with the tax debt.
d. Your taxes for the year in question have not been reassessed within the last 240 days. Reassessed is a term the IRS uses if they have reviewed your tax debt or updated the amount that you owe for one reason or another. If you are not sure if your taxes have been reassessed you should contact the IRS to get confirmation.
If you qualify for chapter 7 bankruptcy and meet the requirements above the tax debt will be eliminated upon the completion of your chapter 7 case. Filing a chapter 7 bankruptcy usually takes about 90 days and nobody can collect on a debt from the date of filing. If it turns out you need to file for chapter 13 bankruptcy and you meet the requirements above, the tax debt will be discharged at the completion of your plan if you are eligible for a discharge. If the tax debt is determined to be non dischargeable, then you will need to pay the full tax debt off while in your chapter 13 plan for up to 60 months. If you have other consumer debts, chapter 13 bankruptcy may make sense depending on your income if you are eligible to discharge your other consumer debts.
Your payment plan in chapter 13 bankruptcy is determined by your household income, family size, amount of priority debt (taxes, child support) and possibly other household expenses that are considered on something called the means test.
It should also be noted that if you have a tax lien on your property and the lien was placed on the property prior to filing bankruptcy, the tax lien will remain on your property even if you receive a discharge of your tax liability in bankruptcy.
As you can see dealing with tax debts can be complicated. If you live in Washington state and have additional questions about how to deal with your tax debt, give Symmes Law Group a call at 206-682-7975 to learn about your options.
- 10 Things You Need to Know If You Have A Civil Judgment Entered Against You July 15, 2016
If You Have A Civil Judgment Entered Against You, here is what you need to know:
Quite often I receive frantic phone calls from consumers stating that a civil judgment has been entered against them and now they want to know what their options are. So what exactly does it mean when a civil judgment is entered against you?
I had the chance to discuss this topic on the New Urban Unlimited show with James Gore on 1150 am KKNW on July 16, 2016 which you can check out by clicking play on the MP3 player below.
Additionally to summarize our conversation, here are 10 critical things you need to know about civil judgments in the state of Washington.
1. A civil judgment determines who is victor in a case and what the award is
If a judgment has been entered in a civil lawsuit, it means that the court/jury has decided that one party to the case is the victor. Included in the judgment is the determination of which side prevailed, and how much money is owed from the judgment debtor to the judgment creditor. Also included are usually attorney fee’s, legal costs of filing the lawsuit and an interest rate that can accrue on the debt.
2. A civil judgment creditor can use local law enforcement to collect
After winning a judgment, the creditor can file a write of garnishment and garnish wages, bank accounts or put a lien on your property. Additionally the creditor can schedule a supplemental hearing where they can make you show up in court and testify about your assets and their locations. If you don’t show up for this hearing post judgment, a bench warrant can be issued for your arrest.
3. A civil judgment can grow after it’s entered
The costs, fees and sometimes the attorneys fees a creditor spends to collect a judgment get added to the judgment. Judgments accrue interest as well. In Washington, the statutory interest rate on judgments is 12%, even if no interest rate is listed. Often I see much higher interest rates included on default judgments up to 26% which can cause your debt load to grow rapidly.
4. civil Judgments appear on your credit report
Any judgment entered against can appear in the public records section of your credit report. This item can bring your credit score down significantly and once a judgment is entered against you it may remain on your credit for several years, even if you satisfy the debt. The credit report would just be updated to “satisfied” and not removed permanently. Most debt collectors don’t report the debt to the credit bureaus, but rather the information is gathered from third party data aggregators who get the information from the court system.
5. Ignore the summons and complaint and you lose
Unless you file a written answer with the court within 20 days of being served, a judgment can be entered against you without your side of the story. You should also send a copy of the answer to the attorney who sued you. All that due process requires is that you get good notice that you are being sued. Do nothing and the creditor wins. So what if you never got notice? See #6.
6. Default civil judgments may be set aside
Anybody who doesn’t respond to a summons and complaint is subject to a default judgment, which means the party suing wins be default. Default judgments can be set aside, however judges are usually reluctant to grant such motions, especially if you admit to owing the debt. Any motions to set aside a judgment must be filed with the judge who entered the original judgment. If you have other debts you are dealing with you time and money might be better served hiring a bankruptcy lawyer to dispose of your debts or at a minimum negotiate a settlement on your behalf.
7. Civil judgments can be appealed
A civil judgment isn’t final until the time period for an appeal has expired. Generally, you can appeal errors of law, but not the factual determinations that a trial court, or a jury, makes. You don’t get to introduce new evidence. This can also be costly as opposed to other alternatives such as bankruptcy.
8. Civil judgments entitle the creditor put a lien on your assets
A judgment lien is an interest in your property that follows the property wherever it is transferred. The lien is only released by payment or agreement with the judgment creditor. This can be an issue when you go to try and sell your home or obtain a loan modification if a lien shows up on a title search and it has not been satisfied.
9. Civil judgments are dischargeable in bankruptcy
Debts reduced to civil judgments can be eliminated in bankruptcy just as the debt that lies behind the judgment could. Bankruptcy looks at the nature of the debt behind the judgment to determine if you can escape it, not to the procedural status of the debt. Most judgments for debt collection are dischargeable in bankruptcy as well as for car accidents if the debt was incurred due to negligence.
10. Civil judgments can last a long time
Civil judgments have a life span provided by state law. In Washington, a judgment lasts for 10 years and can be renewed at the end of that period. Therefore once you have a judgment entered against you it can last a long time and incur a large amount of interest.
As you can see getting a civil judgment entered against you can have huge consequences and it should be avoided at all costs. If you live in Washington state and have additional questions about civil judgments, give Symmes Law Group a call at 206-682-7975 to learn about your options.
- Do I Have To Pass The Means Test To File For Bankruptcy? March 5, 2016
If you have been researching filing for bankruptcy and whether it is right for you, you probably are wondering what the heck is the means test and do I need to pass it? Above you can listen to a candid discussion that I had with Dr. James Gore on 1150AM KKNW on this very topic and the details are below.
The answer as to whether you need to pass the means test will depend on your individual situation. Don’t worry, the means test is not the type of test where you have to sit down with a number 2 pencil and choose the correct multiple choice answer. Rather it is a test created by the U.S. Federal Government to determine whether you are eligible to file for chapter 7 bankruptcy or how much you have to pay in chapter 13 bankruptcy. This test only needs to be taken by consumers who’s household gross income is above the median income for your state and if your debt is classified as primarily (more than 50%) consumer debt. Consumer debt consists of medical bills, credit cards, personal loans, student loans, mortgages and car loans for the most part. Essentially consumer debt is any non business related debt that you have personally incurred for personal use. It should be noted that anybody who has primarily business related debt or tort related debt does not have to pass the means test as this debt is not classified as consumer debt. Tort debt usually consists debt incurred from personal injury such as a car accident where the consumer was negligent. Intentional injurious acts that may be considered torts will be exempt from discharge altogether in bankruptcy for the most part.
What If I am Above Median and My Debt Is Not Business or Tort Debt?
This means that your debt is consumer debt and you will need to pass the means test. The means test is a series of questions and calculations that determines if you have any out of the ordinary expenses that the government deems worthy of being deducted from your available disposable income. The means test provides standard deductions for most items such as food, living, and medical for example. If however you suffer from a medical condition that requires that you spend more than $60 a month out of pocket that you may deduct the excess expense on the means test. Other items that can really help you on the means test are your normal payroll deductions, payments for child support, child care, children’s educational expense if under 18, auto operating and ownership expenses (having a car payment helps), health insurance or other taxes not deducted from you wages. There are other categories but those are the categories that can really help in addition to making up arrears on any secured debts such as a home. Things that won’t help you on the means test include the amount of debt you owe (unless it’s a secured or priority debt such as taxes) or claiming that you pay out of the ordinary normal living expenses such as food. Every bankruptcy case that is filed is reviewed by the U.S. trustee’s office and if you are above median the trustee’s office is going to look to make sure that your means test result makes sense and is allowable. If the means test says that you have no disposable income available in which to pay your creditors then you may qualify for Ch. 7 bankruptcy. If you are showing a positive number on the means test then you probably have to file chapter 13 bankruptcy, although the lower the number the better as that is going to be the amount that you will have to pay to your unsecured creditors over 60 months. If your number equals more than the debt you owe times 60 then it looks like you have a good chance of being in a 100% repayment plan which means all of your creditors will be getting paid over 60 months through your chapter 13 plan.
I Passed the Means Test or It Doesn’t Apply, Now What?
If you have determined that you are an above median debtor but have passed the means test or have primarily business or tort related debt that may create a different problem and one more hurdle to clear to filing for chapter 7 bankruptcy. When you file for bankruptcy every debtor must also file schedules I and J as part of their bankruptcy petition. These schedules must report accurately your current monthly income and expenses. In general your left over disposable income should be close to $0 to show that you don’t have any disposable income left over to pay your bills. If you filed for bankruptcy and you have significant disposable income, say $500 or more, left over every month you could draw an objection from the U.S. Trustee who may raise concerns of not filing with good faith and may seek to convert your case to a Ch. 13 or dismiss your case altogether since you can clearly afford to make payments of some sort to your creditors. It should be noted as well that when including your normal household expenses that you should not be including payments on any debts that would be discharged in your chapter 7 bankruptcy filing since they will not exist after you receive a bankruptcy discharge. If you have determined that you don’t have any disposable income either on the means test or on schedules I & J then you may be a good candidate to file for chapter 7 bankruptcy. If you are not a good candidate for chapter 7 bankruptcy you should consult an attorney to discuss your chapter 13 or debt settlement options to resolve your debts. If you must file chapter 13 bankruptcy, you could always convert your case later to a chapter 7 bankruptcy if your income is significantly decreased. This can occur if a debtor files a chapter 13 bankruptcy but then loses a job and then cannot afford their chapter 13 plan payments.
If you have additional questions regarding whether the means test applies to you in Washington State, give Symmes Law Group a call at 206-682-7975 to learn about your options.
- How Do I Stop A Wage Garnishment Immediately? November 14, 2015
One of the most common questions I get repeatedly from consumers is how do I stop a wage garnishment immediately? I had the chance to discuss this topic on KKNW 1150am radio with host James Gore which you can listen too above. The highlights of the conversation and the steps you can take to protect yourself can be found below.
Wage garnishments seems to always hit at the worst time and when a consumer least expects it. In Washington state wage and bank garnishment is allowed under RCW 6.27.005. It is limited to greater of 25% of disposable earnings or thirty times the federal minimum wage. Unfortunately it is human nature for consumers to wait until the very last minute or after they have already been garnished to take action in order to stop a wage garnishment. Don’t be one of those people! Be proactive about your situation and seek out an attorney who can stop garnishments immediately or go over alternative options if applicable. Here are the steps that you need to take in order to stop a wage garnishment.
Step 1. Figure out who is garnishing you and for what. Many consumers report that they are being garnished and they have no idea why. If you have a payroll department at work you should get in touch with them to learn about the details. You should also ask your payroll department when the next payroll submission is taking place so you know how much time you have to stop the wage garnishment. If your bank account was garnished then you should talk to your bank to identify the creditor taking the garnishment action. If you are being garnished that means that somebody has obtained a judgment against you. In most cases, the creditor would have been required to file a lawsuit and serve you with a summons and complaint outlining the allegations against you. On occasion consumers report not being served with documents. If this is the case then you can obtain a record of your case and identify who was served with the summons and complaint from the court where your case was filed. This should be easily identified on the documents given to your employer or your bank along with a case number. In Washington state most debt collection cases are filed in the Superior or District Court in the county in which you reside.
Step 2. Talk to an Attorney. Now that you know who is suing you and for what you can figure out what to do about the situation. Contacting a bankruptcy/debt settlement attorney should be your logical next step. A bankruptcy attorney can inform you of your options as they relate to your situation as every case is different. Filing a Chapter 7 or Chapter 13 bankruptcy will stop your wage garnishment immediately. In fact if you file your Ch. 7 bankruptcy case within 90 days of when you were garnished you may be able to get the funds back and keep them if you are able to exempt them in your case. Exempting funds means that you are able to protect them.
Step 3. Hire Attorney. If you determine that you need legal assistance to stop your wage garnishment your attorney can either help you negotiate a settlement with your creditor or stop a wage garnishment immediately by assisting you with filing a bankruptcy case if you are a good candidate. If you decide to file a bankruptcy case you should immediately take your required credit counseling course which you can do over the phone or on the computer for about $15-$25. Additionally you will have to pay your legal fee’s and court costs prior to your case being filed, however the court will accept payments on the filing fee (it’s $335 for ch. 7 or $310 for Ch. 13), with a minimum of $100 being paid toward your court fee. After your fees are paid you should gather up all the docs you attorney has asked you for. These include your last 6 months of pay stubs, last 2 years of tax returns, a completed questionnaire that was provided to you, and supply any third party debt collector notices that might not show up on a credit report. After this information is received your attorney can file your case. If you are not able to gather all the docs in time, your attorney can file an emergency case with just your name, address and social security number. You would then be required to file the remaining docs at a later date.
Step 4. Provide Notice. Once your bankruptcy case is filed you will receive a case number immediately and a notice of automatic stay can be faxed to your payroll department or bank to stop any future garnishments from happening if the notice is received prior your payroll submission. Remember if you miss the deadline to provide notice, you may still be able to get any wages garnished back if the garnishment happened with 90 days of filing.
Step 5. Get Garnished Funds Back. If your funds were garnished within 90 days of your bankruptcy filing and the funds are exempt, your attorney can request that the party who garnished your wages refund the garnishment. This is possible because any monies garnished in the last ninety days prior to your case filing are exempt and property belonging to the bankruptcy estate under 11 U.S.C. §522. Further any transfers made ninety days prior to the filing of the bankruptcy are avoidable under 11 U.S.C. §547.
These steps provide a basic outline of the actions needed to stop a wage garnishment immediately. Your attorney can further advise you of the bankruptcy process and let you know if you are a good candidate to file bankruptcy and other options if applicable to deal with your debt collector. If your wages are being garnished or you are about to be garnished and you live in Washington State, give Symmes Law Group a call at 206-682-7975 to stop your wage garnishment immediately or use our contact form to tell us about your case.
* This article was updated on August 22, 2016 *