Seattle Bankruptcy News - Symmes Law Group

Can A Seller Keep Buyers Earnest Money?

keep earnest moneyIf you are involved in a real estate purchase and sale agreement where a potential buyer has backed out of an offer to purchase a property, you probably want to know who can keep buyers earnest money that was offered as part of their purchase offer.

What is Earnest Money?

Earnest money is a deposit a home buyer submits with an offer to buy a property.  The purpose is to show a buyer that you are serious about purchasing the property and the higher the earnest money amount is, the more likely it is that your offer will be accepted.  “Earnest” is an old fashioned word to mean your “serious” about purchasing a property.  The earnest money funds can also be referred to as a “good faith” deposit and are often held by a third party escrow company as part of the purchase and sale transaction.

How Much Should A Buyer Offer in Earnest Money?

The amount to offer in earnest money really depends on the type of transaction you are involved in and the competitiveness of the market you are in.  The Seattle Metro market is currently hyper competitive so it would be advisable for a buyer to offer more in earnest money if they really want a property so show the buyer you mean business. Typically it is normal to see an earnest money deposit of 1-3% of your offered purchase price but keep in mind, having a higher earnest money offer could make the difference of a seller accepting an offer or not.

What Happens to the Earnest Money if the Purchase and Sale Transaction is Not Completed?

If an offer to buy a home is accepted by a seller, then the earnest money paid as part of the offer would be applied to the purchase price.  If however, the buyer backs out of the sale or the seller changes their mind, that could trigger a series of events that would leave the earnest money paid in flux.

Most purchase and sale agreements in real estate include several contingencies that allow a buyer to back out of a transaction and allowing the buyer to receive their earnest money back.  These contingencies include stating that the offer is subject to the buyer obtaining mortgage financing within a certain time period or home inspections that could reveal defects in the property.  In a hot real estate market such as Seattle, Washington, buyers are increasingly making all cash offers and waiving contingencies in order to get their offer accepted by sellers.  This is very beneficial to sellers as they could now be in a better position to be entitled to the earnest money should the sale not go through.

Earnest money deposits are governed in Washington, State by RCW 64.04.220. Should the purchase and sale transaction not go through it would be up to the party who feels they are entitled to earnest money paid to make a written demand for all or any part of the earnest money held by the holder (typically Escrow Company).  The holder must then within fifteen days of receipt of the written demand:

(1) Notify all other parties to the transaction of the demand in writing

(2) release the earnest money to one or more of the parties; or

(3) Commence an interpleader action.

RCW 64.04.220 further states that “the holder’s notice to the other parties must include a copy of the demand and advise the other parties that: (a) They have twenty days from the date of the holder’s notice to notify the holder in writing of their objection to the release of the earnest money; and (b) their failure to deliver a timely written objection will result in the holder releasing the earnest money to the demanding party in accordance with the demand upon expiration of the twenty-day period. The holder’s notice must also specify an address where written objections to the release of the earnest money must be sent.
(4) The twenty-day period commences upon the date the holder places the holder’s notice in the United States postal service mail and sends an email …”

What is an Interpleader Action?

An interpleader action is a civil action, much like a complaint filed to begin a lawsuit in which the holder will initiate a legal case in civil court naming the buyer and seller as defendants in which they can litigate a case over who is entitled to the earnest money paid while the holder is entitled to a reasonable attorney fee for having to file the interpleader action.  The earnest money in question will be deposited with the court where the interpleader action is filed.

Ideally the buyer and seller will be able to work out any problems among themselves before having to deal with an interpleader action and potentially incur further costs, however some disputes may not be able to be resolved causing this issue to have to be litigated within the civil court.

If you live in Washington State and are looking for assistance with dealing with a purchase and sale agreement gone wrong involving who can keep earnest money, give Symmes Law Group a call at 206-682-7975 to speak to a real estate attorney today.

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How Will the New Tax Laws Impact Bankruptcy Filings?

Tax Laws Impact Bankruptcy FilingsThe new United States tax laws which could impact future bankruptcy filings was signed into law on January 3, 2018. The new law brings with it many changes that will affect consumers as well as businesses. In general, the biggest impact may prove to be on businesses, however there are some important changes that will impact the majority of American taxpayers and future bankruptcy filers.

Consumers who are contemplating filing bankruptcy under chapter 7 or chapter 13 bankruptcy may feel an impact if they are above median income earners who need to pass the means test to qualify for bankruptcy or who may seek lower plan payments in chapter 13 bankruptcy. This is because in general, for most higher earning Americans, they will likely receive a tax cut in the immediate future which will make available more disposable income in which to pay to creditors through a chapter 13 bankruptcy, or give less of a deduction on the bankruptcy means test.

How does the Means Test Work in Bankruptcy?

The means test determines how much disposable income a person has to pay their creditors. If this number is zero, then there is a good chance you could qualify for chapter 7 bankruptcy. If the number is higher, then you would likely to file chapter 13. In chapter 13 bankruptcy you would then seek to make your available disposable income lower by taking allowed deductions, similar to doing your taxes, on the means test. These deductions are often calculated from your paystubs and include things like your federal taxes, Medicare, social security etc. Therefore, if these amounts are less in the future, then you won’t get as much of a deduction on the means test.

The good news is that a consumer will have more disposable income in which to possibly avoid filing bankruptcy, although for most people, it probably will not make a significant difference. For lower income earners who are already below the median income, the impact from a bankruptcy standpoint will most likely be negligible.

So what are the 2018 Major Changes to the Tax Code Moving Forward?

1. Your income may put you in a different tax bracket
Tax brackets have changed under the new tax law. Taxpayers will want to look at the changes and what they mean for those filing single and those filing jointly. Take a look at all of the new tax brackets and tax percentages here.

2. A majority of American taxpayers will benefit from lower tax rates
For example, single taxpayers earning between $38,701 and $82,500 will reduce their tax liability from 25 percent to 22 percent. Additionally, those joint filers earning between $165,001 and $233,350 will get a reduction in tax liability from 28 percent down to 24 percent. For five additional tax brackets, there will be reductions of 3 percent or more. To illustrate the potential savings on higher earning households, consider that a family earning $233,350 would potentially reduce their tax liability by more than $9,000.

3. The standard deduction goes up and the personal exemption goes away.
The new tax plan increases the standard deduction from $6,350 to $12,000 for individuals and from $12,700 to $24,000 for married couples. The personal exemption has been eliminated. The net effect is a modest increase in the overall tax savings for those taxpayers who did not previously itemize deductions.

4. Tax preparation fees are no longer deductible
You can no longer write off your previous year’s tax preparation fee. Previously the fee you paid a professional to do your taxes was an eligible deduction.

5. You can no longer write off mileage if you are a W-2 employee
Previously, mileage had to exceed 2 percent of your adjusted gross income (AGI) in order to write it off, but now even if that 2 percent is met or exceeded it cannot be written off against income.

6. Taxes on business owners has changed
If you own a business, you will now have a flat tax of 21 percent, instead of the 35 percent tax rate that was previously in place. This results in a huge tax savings for business owners. The idea is that the savings will trickle down to employees of these companies but only time will tell if consumers will benefit or this tax break just makes companies richer.

7. The child tax credit will go up from $1,000 to $2,000
If you have a child living with you who was under the age of 17 at the end of the year you qualify for this deduction. This change also increases the income threshold at which the credit gets phased out to $400,000 for married taxpayers and $200,000 for others. This could mean significant savings for taxpayers with large families.

8. Medical and dental expense deductions have been expanded
While the percentage has gone up and down over the years, the most recent requirement was that your medical and dental expenses had to exceed 10 percent of your adjusted gross income (AGI) in order to write them off against your income. Now, they must only exceed 7.5 percent of your AGI for you to be able to deduct them.

9. Alimony is no longer deductible or taxable
Under the new tax law, alimony will no longer be deductible against income for the person paying it, nor will it count as taxable income for the person receiving it. This change is effective for divorce decrees signed after January 1, 2019.

10. Entertainment expenses can no longer be deducted, but meals can
The deduction for business-related entertainment has been repealed as part of the new tax plan. Businesses can still generally deduct 50 percent of the cost of qualified meals.

11. There are lower limits on mortgage interest deductions
Securing a good mortgage interest rate may matter more now than ever. This Is because home mortgage interest for debt incurred after December 15, 2017 to acquire or improve a home, is now limited to the interest on $750,000 worth of principal. This is a decrease from the prior $1,000,000 principal limitation and applies to both primary and secondary residences. Home loan debt acquired prior to December 15, 2017, is grandfathered and this change does not apply. This provision could affect Washington consumers more than in other states as the rise in property values continues and the median household value in Seattle is above $750,000.

12. There is a limit on interest deductions for home-equity lines of credit (HELOCs)
Like primary mortgage loan interest, the interest on HELOC loans has also been impacted by the new tax law. Interest on these loans will no longer be deductible, regardless of when the loan was acquired, unless the funds are used explicitly for home improvements or acquisitions.

13. There are now limitations on property, state and local tax deductions (“SALT”)
Taxpayers’ state and local tax deductions will now be capped at $10,000 under the new tax legislation. Meaning, if you itemize deductions on your taxes, you will be able to deduct your state individual income, sales and property taxes up to a limit of $10,000, but you’ll have to choose between property tax and income or sales tax. All three cannot exceed that $10,000 amount. This reduction will also impact Washington consumers negatively as the state and local taxes are rising sharply in 2018 to over 17% in some areas and the net result will be less of a deduction if taxes exceed $10,000.

14. The estate tax exemption is doubled
The new tax law doubles the estate tax exemption to $11.2 million for single filers and $22.4 million for joint filers. This change will only affect the roughly 1 percent of the American population that pays estate taxes.

15. The Obamacare medical tax is no more
The new tax legislation eliminates the individual health care mandate penalty tax that was imposed by the Affordable Care Act (aka, “Obamacare”) beginning in 2019. However, The penalty tax will remain in effect for the 2018 calendar year.

16. “Like-kind” exchanges are limited
Like Kind Exchanges under Section 1031 of the Internal Revenue Code are now limited to exchanges of real property. They no longer apply to any other property, including personal property associated with real property.

17. Education tax credits, student loan interest deductions remain
Many of the 44 million Americans with student loan debt feared that these changes could be devastating. However, the ability to deduct student loan interest will remain intact in the future.

18. The use of Section 529 accounts has been expanded
This may be one of the most significant impacts of the tax reform on education. Section 529 accounts, which are tax-advantaged savings and prepaid tuition plans designed to encourage people to save for future college costs, have been expanded. Starting in 2018, these accounts can be used for tuition at public, private or religious schools in addition to college tuition. Section 529 will be limited to $10,000 per student during any taxable year.

If you live in Washington State and are looking for assistance with figuring out your bankruptcy or debt settlement options, give Symmes Law Group a call at 206-682-7975 to speak to a debt relief attorney today.

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Are Washington State Consumers Headed for Bankruptcy in 2018?

consumers headed for bankruptcy With the stock market and the economy at an all-time high, how are Washington state consumers really doing day today and are consumers headed for bankruptcy in 2018? As a Seattle bankruptcy attorney, I have a good idea of how every day Washingtonians are doing in the current economy. While Seattle has grown in size and wealth in the last 5 years, so has the cost of living, driving many consumers to pick up and move or file for bankruptcy just to stay afloat.

Recent national statistics and economics support a theory that the economy simply cannot keep going the way it is going forever. In fact, in the last 5 years wages have remained stagnant, while most types of debt ballooned out of control. Prior to the financial crash, there was a 65% percent increase in overall debt, mostly attributed to mortgage accounts that consumers could not afford, while there was not a whole lot of growth in other debt areas according to the Bureau of Labor Statistics.

After the financial crash of 2008 and in the following 5 years, America has seen significant increases in auto loans (78% increase) and student loan debt (72% Increase), while credit debt continues to rise to pre-financial crash numbers. So, with stagnant wages and increased costs of living, there is now likely the lowest available disposable income in recent history available to the average person in which to service these debts or set aside savings for retirement.

So What Are Options for Washington State Consumers to Deal With Debt?

(1) Move to a lower cost of living location

While this may not be preferred, it is a product of the economy we live in. Native Seattleites and millennials are being pushed out from the city in Search of more affordable housing in order to service their debts. Many are moving back in with parents or moving to a different city or different state as Seattle is now the 6th most expensive city in the country.

(2) Eliminate Your Debt Through Bankruptcy

If you have decided that you are staying in Seattle or a similarly expensive city, whether it be for work or personal reasons, then you need a plan to create more disposable income in which to save for retirement or perhaps for a down payment on your own home, which these days is likely cheaper than renting an apartment with the added benefit of building equity as the economy continues to grow. This way you have your money working for you, rather than you working just to pay rent.

If you qualify, you can eliminate unsecured and unwanted credit, medical, auto loan debt, setting you up for a future in which you can buy that home, perhaps even in a year or two from the date you file a bankruptcy case. Most debts will be eliminated setting you up for a fresh start. In a chapter 7 bankruptcy your case could be completed in 90 days whereas a chapter 13 bankruptcy repayment plan last 3-5 years and is usually filed by those who’s income is higher than the states median income and they don’t qualify for chapter 7 or they are looking to make up payments they fell behind on a house. The amount you would need to pay back is based on your available disposable income determined by something call the means test. Either way, you would be setting yourself up for a fresh start in the future.

(3) Settle your Debts for Less Than the Full Balance

If you have savings or help from family, you are delinquent on your debts, and have a hardship for why you can’t make monthly payments, you may be able to negotiate settlements of 50% or less on certain unsecured credit debts. In general credit unions are harder to negotiate with as well as medical but it still may be possible if you have a lump sum payment to offer. This is better than just making monthly payments that continue to accrue interest increasing the amounts you pay out.

(4) What about Student Loans?

If you are part of the 78% massive increase in student loan debt over the last 5 years from the crash then you are probably wondering what you should do with your student loans. All types of student loans in most cases are not dischargeable in bankruptcy. Therefore, for federal student loans I would advise signing up for an income based repayment plan where you get credit for your payments every year and they will be eventually be forgiven after 20-25 years depending on the plan you qualify for. There is also public service forgiveness where they could be forgiven in 10 years if you qualify and if the government does not meddle in this program to take this option away. If you are on a plan you should not be paying more than you can afford and you can go back to living your life.

If, however your student loans are private, these are some of the worst types of debt you can have as banks are not required to give you an income repayment plan or reasonable repayment plan. Therefore, I would advise, if at all possible, eliminating these debts as fast as you can. In many cases these debts will settle significantly lower than the full balance, so a lump sum settlement is the best way to knock these out, otherwise they could linger for many years. If you do have good credit you could check to see if you qualify for a loan or other refinance program to see if you can raise funds to get out of these student loans. At least other loans may not be subjected to being non-dischargeable in bankruptcy.

(5) Don’t Buy Cars You Can’t Afford

Yes, I know, everybody wants the latest and greatest cars, but is it really worth it. Auto debt has skyrocketed out of control at higher interest rates and many consumers putting loans on top of loans when they trade in a vehicle, making the vehicle significantly under water the moment you walk off the lot. Keep your payments reasonable and if you can’t afford the car or it is significantly under water you can give it back and consider bankruptcy options to start fresh so this debt won’t continue to follow you and balloon out of control.

While the economy seems to appear to hum along and be on the upswing, eventually I believe as do many economists, that the market must correct, and when it does, many consumers will be left holding the bag. While it may not happen tomorrow, it could happen in 6 months, a year or two years and by unknown or known events. Consumers should prepare for that day now and set themselves up for success in the future by knowing about their options now.

If you live in Washington State and are looking for assistance with figuring out your bankruptcy or debt settlement options, give Symmes Law Group a call at 206-682-7975 to speak to a bankruptcy attorney today.

How Do I Get Approved For a Loan Modification?

How to get approved for a loan modificationIf you have become delinquent on your home mortgage you are probably searching for options for how you can avoid foreclosure, get approved for a loan modification and make your mortgage payments more affordable to keep your home.  If you have been delinquent in your mortgage payments for at least the last 90 days, your bank servicer may have mailed you a notice of pre-foreclosure options or even a notice of default or notice of trustee sale. These are the first steps in the foreclosure process in Washington state, but as the notice of pre-foreclosure options and notice of default tell you, you may have options to retain your home and one of those options is to get approved for a loan modification.

A loan modification can help you reduce your interest rate on your mortgage payment, allow arrears to be placed on the back end of a loan, or even lowers your overall mortgage payment.  So why would a bank agree to a modification? The answer is because it is cheaper for the bank to give you a modification rather than foreclose on your home.  With that said, a loan modification is not guaranteed just because you apply and the bank has several guidelines that they will use to evaluate whether it is in their best interest to approve you for a loan modification.

After the housing crash of 2008, the government created a program called Home Affordable Modification Program (HAMP) which allowed for banks to adjust mortgage payments to 31% of a borrower’s income.  This program was phased out at the end of 2016 and replaced by a program called the Flex Modification program which applies the same measures, but it allows lenders to also consider how many days delinquent borrowers are and the value of their home.  The flex loan modification program aims to reduce monthly mortgage payment by 20% for eligible borrowers.

What are the requirements to get approved for a loan modification?

(1)   You mortgage must be owned or guaranteed by Fannie or Freddie Mac.  Loans from FHA, VA or USDA do not qualify.

(2)   Your mortgage must be at least a year old.

(3)   The mortgage you are trying to modify must be in first position on your home.

(4)   You must be at least 60 days delinquent on your mortgage payment.

(5)   The mortgage loan must not have been modified 3 or more times.

(6)   You must submit a borrower response package provided by your loan services as well as a completed 4506T form requesting a copy of your taxes, last filed tax return, a letter of hardship as well as proof of your last 60 days of income and bank statements.

With this information your bank will evaluate whether to approve you for a loan modification and if you are more than 90 days delinquent on your mortgage loan you may be eligible for a streamline version of flex modification in which a full forms and income verification package may not be required.  The streamline modification goal is also to reduce mortgage payments by 20%.

Once the bank receives all of the required documents, they will do their own analysis to determine whether you qualify for a modification.  The most important factors that will impact whether you receive a modification or not are going to be how much in arrears you are, the value of your home and whether you can afford a modified payment moving forward.  The bank needs to make a business decision on whether it is more beneficial for them to give you a modification or foreclose on your home.  For a complete look into how the bank will analyze your application you can click HERE

If you live in Washington state and would like to apply for a loan modification and get the protection and peace of mind of not being foreclosed upon while in the modification process you should consider applying for a modification through the states foreclosure fairness program in which a mediator as well as local attorneys for the bank and yourself will be present to hopefully make sure things go smoothly.

If you are denied a modification or have not applied in time in which to stop a foreclosure sale on your home, you may qualify to file a chapter 13 bankruptcy in order to stop a sale and make up your arrears over 60 months.  You can also apply for a loan modification while in a chapter 13 bankruptcy.

If you live in Washington State and are looking for assistance with applying for a loan modification give Symmes Law Group a call at 206-682-7975 to speak to a loan modification attorney and learn about your options.

What Happens After Filing For Bankruptcy?

filing for bankruptcyIf you are considering filing for bankruptcy, you likely want to know what exactly happens once you do so. However if you want to know if filing for bankruptcy is a good idea and whether chapter 7 or chapter 13 bankruptcy makes the most sense, you should consult with a bankruptcy lawyer prior to filing your case.

So what happens after you have filed for bankruptcy?

After you have reviewed and signed your bankruptcy petition and supporting schedules your bankruptcy attorney will file your documents with the local bankruptcy court in the jurisdiction in which you reside. In Washington State, all bankruptcy attorneys must file cases online using the courts Electronic Case Filing System. Once the case is filed, the clerk of court will review the documents that were filed in your case and make sure you have filed all of your required documents. If something required is missing, the clerk will issue a notice of deficient filing and you will need to make sure you comply with the court notice by the deadline listed if you don’t want your case to be dismissed.

Upon the filing of your case, you will also be issued a bankruptcy case number, a bankruptcy trustee will be assigned to your case, and mail will go out to all of your creditors that you listed in your bankruptcy petition from the bankruptcy noticing center.  This all happens immediately and from the time your bankruptcy case is filed, the bankruptcy automatic stay will go into effect, stopping most creditors from attempting to collect on a debt. This is what stops wage garnishments and foreclosure actions on your home.

Next, your attorney sometime before your required 341 meeting of creditors will send the trustee assigned to your case your last filed tax return, last 60 days of paystubs, last 30 days of bank history and a declaration form as well as a chapter 13 info sheet if filing for chapter 13.  The meeting of creditors is held in about 30-45 days after your case is filed and in the jurisdiction where you live.

At the meeting of creditors, the trustee will ask you basic questions about your bankruptcy petition and financial circumstances.  Creditors can show up at the meeting to ask you questions under oath, but that is a rare occurrence.  Creditors are more likely to show up if you know you have the possibility of a hostile creditor such as an ex spouse or business partner who is trying to prove that a debt may not be dischargeable or if there is the possibility of making a case for fraud. Usually general creditors such as somebody representing a credit card or medical bill won’t show up.  In many cases, if you don’t own many personal assets, your meeting will be less than 5 minutes, however usually about 1o other people are assigned to meet with the bankruptcy trustee at the same time so you should expect to be at court for about an hour.

If you haven’t already completed your required financial management class, you should do so after the meeting of creditors in order to ensure that you will receive your discharge in about 90 days after your case is filed in chapter 7 or at the end of your plan in chapter 13 bankruptcy.

Creditors or the US Trustee have the right to object to your bankruptcy filing or discharge and are given about 90 days in which to do so. In most cases, no objections are filed and the discharge will be issued in 90 days after your case was filed.  This is what you are looking for as a bankruptcy judge signs an order stating that your debt has been forgiven if the debt is of a type that is dischargeable.  In a chapter 13 case you would be on a 3-5 year repayment plan so the discharge would happen once the plan is completed.

Filing For Bankruptcy and Case Closure

One you receive you bankruptcy discharge, your case can close. However if a chapter 7 trustee is investigating assets or trying to sell assets such as real estate for the benefit of your creditors, your case can remain open, even after your bankruptcy discharge has been issued. Once your discharge is issued however, your credit reports should be updated to reflect that your debts have zero balances and are closed out.  You will want to review your credit reports about 30 days after your discharge has been entered to make sure items are being reported correctly.  If they are not reporting correctly you can dispute these items with the credit bureaus.

If you happen to get a collection letter or call from a debt collector regarding a debt that was discharged and incurred prior to your case being filed, it is likely because the creditor did not receive notice or it may be a scam, so be mindful of that.  Usually scam callers have to do with pay day loans and these calls should be reported to the Federal Trade Commission, FBI or your states Attorney General.  If your case was a no asset case, which means the bankruptcy trustee did not take or sell any assets of yours, that debt should be discharged whether it was listed or not.

This is a general guide of what happens in a typical bankruptcy case, however other things you may have to deal with or consider are reaffirmation agreements for secured debts, trustee objections and motions to dismiss proposed plans or filing or defending the rare adversary case if there is a creditor who is behaving badly and not adhering to the rules of the bankruptcy code or if you failed to abide by the rules of the bankruptcy code by acting in good faith. Filing for bankruptcy can be complicated and have consequences but if done properly with the proper counsel you could be debt free and get the fresh start that you deserve. Most debtors are able to purchase a home after about 2 years of a bankruptcy filing and shockingly you will be offered offers for new creditor cards and vehicles almost immediately after filing, so there is hope that you will be able to rebuild your credit scores in short order.

If you live in Washington State and are looking for assistance with filing for bankruptcy, give Symmes Law Group a call at 206-682-7975 to speak to a bankruptcy attorney and learn about your options.

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How Do Mortgage Payments Work?

HowdomortgagepaymentsworkFiguring out what you owe on your mortgage can be very difficult, especially when you likely have to go in circles with your loan servicer to get a competent person to answer the phone with regard to how your mortgage payments work. I discussed this topic on 1150AM KKNW recently and you can listen to the entire conversation here:

For most people, their mortgage is their biggest debt that they will ever have and their home is their most important and expensive asset that they will ever own. Surprisingly, the people accounting for your payments are increasingly incapable of the very basics of their job.  These days, it is very common for home loans to get sold to another owner the moment the deal closes. It is even more common for your note to get sold into a trust with many other loans without you having a say in the matter. The right to collect the loan payments is bought and sold separately from the right to the payment amount which is usually handled by a separate loan services.

Increasingly, the servicers are making mistakes as they cut corners for the almighty dollar at your expense and it not uncommon for your services to change several times over the lifetime of the loan.

So what do you need to know to assess whether your loan servicer has got the numbers right?

1. Principal balance isn’t always what you owe

For most people if you ask somebody what they owe on their mortgage they will recite the principal balance. The principal balance is the remaining part of the amount originally borrowed that is still unpaid. With that said, it’s possible you owe other fee’s that you may not be aware of such as delinquent payments that are mostly interest, late fees, escrow advances, or junk fees that most delinquent loans consist of in the form of penalties.

Finding the principal balance gets even trickier if the loan has been modified to include a non-interest bearing amount or some other out of the ordinary adjustment. So the amount necessary to pay off the loan upon sale, or refinance, may very well include charges from past delinquencies plus fees for calculating what you need to pay to satisfy the debt in full.

2. Payments are credited to oldest month unpaid

If you fall behind on a mortgage, then resume making payments, your payment will likely be credited to the oldest month still unpaid.
So the payment you make in March 2017 may be credited to July 2016 if you missed a payment back in July 2016.  The servicer will then report that you remain due for July 2016, even though you sent a check in March 2017.  It’s all in the rules about how payments are credited under the terms of the note that you signed when you closed on your home and financing documents that you probably did not read closely at that time.

3. Payments may not be credited

Loan servicers usually have a separate super secret account labeled “Suspense” into which they sometimes dump your payment.  Of course they don’t tell you this when you sign your loan documents. The bank usually has your money, they just haven’t credited it to the amount you owe when the funds are in a suspense account.

Usually the only reason for putting funds in a suspense account is when the payment submitted is too little to make a full payment on the monthly loan amount. Servicers are not required to credit partial payments to your account. Therefore, they put the money in suspense until they receive enough money to make the usual payment.  Suspense accounts can often contain errors of unapplied funds in the tens or even a hundred thousand dollars so this is the first place I would check if it looks like you are being reported delinquent on a mortgage payment.  Therefore, a mortgage statement that doesn’t address any funds held in suspense would not tell the whole story.

4. Escrow accounts contain something extra

If your local property taxes and hazard insurance are paid by the lender, you have an escrow account. Under federal law, the lender is allowed to collect more than the sum of the year’s taxes and insurance as protection against the borrower’s non payment. The extra money, the “cushion”, can be no more than 1/6th of the annual expenditures. It remains your money, it’s just held by the servicer should the servicer have to make the payment on your behalf should you not be able to pay.

You should also get an annual escrow analysis that shows income and expenses in the past year’s escrow account and a projection of the coming year’s expenses. That projection will determine what you pay in escrow payments going forward.

5. Statement doesn’t come from owner of note

Now that it is common for loans to be bundled up and sold on Wall Street to investment trusts, the work of collecting your payments has been handed off to loan “servicers”.  The owner of the note (likely a trust) pays a company to deposit your payments, keep track of fees and expenses, and take action if you don’t pay. The servicer rarely owns the note, they just have the right to collect the money.

Servicers change and they change quite often.  When there’s a loan handoff from one servicer to a new servicer, details about anything unusual in the loan account sometimes gets lost. You should review your monthly statement. The problem of finding out what the servicer thinks you owe became such a problem that regulations written pursuant to the Dodd-Frank act gave borrowers some protection. Now, a borrower with a home loan can make a Request For Information about their loan and expect answers within a shorter period than under the old law.

If the servicing of the loan has changed to a new company, the borrower has a window in which to request information from the old servicer, to compare with what the new servicer thinks.

If you live in Washington State and are looking for assistance with a loan modification or foreclosure defense, give Symmes Law Group a call at 206-682-7975 to speak to a bankruptcy attorney and learn about your options.

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Can a Business File Bankruptcy?

Can a business file bankruptcy?Yes a business can file for bankruptcy, but a business owner will need to determine whether it will make sense to file a business bankruptcy, or deal with the debts on a personal level through a personal bankruptcy or debt settlement.  A business is eligible to file Chapter 7 or Chapter 11 bankruptcy.  Chapter 7 bankruptcy is a complete liquidation of the businesses assets and debts, but the catch is that a business does not get a discharge of debts.  This differs from a personal chapter 7 case in which the individuals are usually given a discharge of debts that are eligible for a discharge.  A Chapter 11 bankruptcy is a type of bankruptcy that allows a business to reorganize its debt in a payment plan. This type of bankruptcy is usually filed by high net work individuals or businesses who want to remain in open and figure out a way in which to pay their debts over time.  Chapter 11 bankruptcy cases have many requirements and can be very expensive due to the complexity of the cases and requirements.

You can check out the audio conversation I had regarding whether a business can file bankruptcy that was live on 1150AM radio here:  
(1)   Does chapter 7 bankruptcy make sense to file for the business if no discharge is given?

In most cases the answer is no because a business cannot receive a discharge of debts, which means the business will still have debt at the end of the bankruptcy filing.  With that said, there is a situation in which it would make sense for a Washington state business to file for chapter 7 bankruptcy.  In Washington state, individual owners of a corporation or LLC are generally personally liable for all of the taxes incurred by the corporate entity, however Washington state law provides that the individual owners of a corporation or LLC will not be liable for premiums owed to the Washington State Department of Labor and Industries [See RCW 51.48.055(4)] and the Washington State Department of Employment Security [See RCW 50.24.230(3)] if the business associated with the debts files and completes a Chapter 7 bankruptcy.

Therefore, the only reasons in most cases it makes sense for a business to file chapter 7 bankruptcy is to either get some help liquidating assets or avoid personal liability on L&I taxes by completing a Ch. 7 case which is solely based on Washington state law, not Federal bankruptcy law.

(2) Can Individuals file for bankruptcy to get out from business debts?

In many cases the answer is yes if the business owners have personally guaranteed the unsecured business debts.  Debtors best options will likely be to need to negotiate settlement for less than the full balance on the debts or file a personal chapter 7 or chapter 13 bankruptcy to escape liability if they qualify and it makes sense. With that said, filing a personal bankruptcy may not relieve a person of Washington state L&I premiums, which is why a corporate chapter 7 bankruptcy filing may be necessary as well to get out from that type of debt.

(3) What happens if a business files chapter 7 bankruptcy?

The first step after filing a bankruptcy case, is that a bankruptcy trustee will be appointed to the case.  Their job is primarily to liquidate assets and pay creditors from their proceeds.  If your business does not have many assets, your case may close in about 90 days.  Otherwise the case can stay open until all assets of value are liquidated and creditors paid.  The case will close without a discharge of debts, which is different than from a personal bankruptcy, where an individual can receive relief from their debts.

(4) What if I don’t owe L&I Taxes related to my business?

If you don’t have any Washington state L&I taxes to worry about, then it makes sense to simply dissolve the business and assets on your own and then if there are other unsecured debts you are personally liable for from the business, file personal bankruptcy if it makes sense or settle your debts outside of bankruptcy.

(5) Can my business be sued after it is closed?

The short answer is yes, but if the business has no value or assets, then any judgments against the business will be moot.  If you have dissolved the business, then you should be more worried about being sued personally if you have personally guaranteed the debts.

(6) How much money can I make personally to qualify for chapter 7 Bankruptcy?

The amount you can make varies based on your family size and your household gross income.  However there is an important exception in the bankruptcy code where if 51% or more of your debt is business related, you don’t have to pass something called the means test and the income limits don’t apply to you.  With that said, you will still need to show on bankruptcy schedules I & J of the bankruptcy petition, which shows your current income and expenses, that you don’t have disposable income in which to pay creditors.

At the end of the day, if business dream does not play out the way you expected, at least you know you have options in which to start rebuilding your personal credit and financial situation.  If you live in Washington State and are looking for assistance in managing your business related debts, give Symmes Law Group a call at 206-682-7975 to speak to a bankruptcy attorney and learn about your options.

Who is National Collegiate Student Loan Trust?

National Collegiate Student Loan TrustIt’s not surprising that you have never heard of National Collegiate Student Loan Trust, in fact you are probably reading this article because you have no idea who they are or why they have filed a lawsuit against you.  National Collegiate Student Loan Trust in most cases has to do with a private student loan that you took out or personally guaranteed.  The interesting thing is this entity isn’t a lender, servicer or guarantor of your loan. Instead, it’s a series of trusts that contain numerous private student loans packaged and sold as investment vehicles to investors.  While private student loans are not dischargeable in bankruptcy, this entity may agree to a settlement of your loan for 50% or less of what you owe them if you have a lump sum available to offer due to the investors seeking to recover as much of their investment as possible.  Furthermore you could also choose to fight the lawsuit and force National Collegiate Student Loan Trust to provide proof that you owe the debt by providing a promissory note signed by you or proof that the trust has standing to sue you for the debt.

I am guessing that if you are being sued by National Collegiate Student Loan Trust, at some point in your life you borrowed or co-signed a private student loan from JPMorgan Chase Bank, N.A., Charter One Bank, N.A., Wells Fargo Bank N.A., Bank of America, N.A., RBS Citizens, N.A. or Union Federal Savings Bank among others.  These lenders are called loan originators since they created the loans.  What you probably were not told when you signed up for the loan is that shortly after the bank lent you the money, the loan was transferred to an entity called The National Collegiate Funding LLC.  This company has no function aside from hanging on to the loan until it’s ultimately transferred into the trust.  This entity is called a depositor while a servicer is the company that collected the money on your private student loans and sent you a bill every month.

Did You Know That There is More Than One National Collegiate Student Loan Trust?

Yes it’s true that there are numerous National Collegiate Student Loan Trusts made up of hundreds if not thousands of private student loans packaged and sold off from the originator to the depositor and then sold to investors.  Each trust is identified by a numeric code, such as National Collegiate Student Loan Trust 2007-3.  Here is a sample prospectus from National Collegiate Student Loan Trust 2007-3 just to get an idea of how complex this system is.

Once the loans are transferred into a National Collegiate Student Loan Trust, bonds are sold to investors. Each bond entitles the investor to receive distributions from the trust based on the amount of money that comes in from private student loan borrowers.

The greater the percent of loans in the trust that are paid on time, the better the return on the investor’s investment. But if too many of those loans go into default, the investors don’t make very much money which opens up the door for you to settle your debt for less than the full balance of the student loan you owe or possibly challenge the validity of the loan.

What Happens Once I Default on A National Collegiate Student Loan Trust Debt?

Once you have gone delinquent on your National Collegiate Student Loan Trust debt, the operators of the trust may hire a third party debt collection company or law firm to send out collection letters or call consumers.  The primary debt collection law firm hired for these loans is Patenaude & Felix. Unfortunately for National Collegiate Student Loan Trusts and many other third party debt buyers, the information that they have from major banks, the originators of the loans, only includes a spreadsheet of information with consumers information. It is very possible that National Collegiate Student Loan Trust nor Patenaude & Felix cannot produce original contracts or promissory notes signed or any proof that you actually owe on a debt or that National Collegiate Student Loan Trust has standing to collect on the debt.  Further, if National Collegiate Student Loan Trust shows up on your credit report it is likely that they will not be able to validate that you owe a debt in accordance with the Fair Credit Reporting Act and therefore any negative reporting must be removed from your credit upon a request for validation of the debt.

How Should I Handle A Debt Being Collected By National Collegiate Student Loan Trust?

Now that you know who National Collegiate Student Loan Trust is, the next step is to figure out  how you can deal with them.  Your first contact with this company will likely be through a letter that you receive in the mail from a third party debt collector or debt collection law firm such as Patenaude & Felix indicating that they represent National Collegiate Student Loan Trust who has purchased your Student Loan and that you should contact them to make a payment on a debt that they are collecting for.   If you don’t take any action then at some point it is likely you will receive or be served with a Summons and Complaint, also known as a lawsuit.  These are legal documents that indicate that a lawsuit has been filed against you and you will have 20 days to respond from the date of service to avoid having a default judgment being entered against you. It is likely that your case will have been filed in the county in which you live in either the superior or district court.  Also be on the look out for any case filed against you without a case number.  If your case does not have a case number, you still must respond to the complaint to avoid a default judgment being entered against you.  However if there is no case number you have a better chance of the law firm not pursuing the collection in the near future since they have to incur more fee’s in which to actually file your case at the court house.  If anything at least filing an answer will buy you some time.

If you get a default judgment entered against you, that allows National Collegiate Student Loan Trust to garnish your wages, bank accounts or place a lien on your home. You will want to avoid this from happening at all costs.  Having a judgment against you will impact your ability to settle the debt for less than the full balance and can also affect your credit scores and impact your ability to gain favorable credit in the future

How you decide to handle debt being collected by National Collegiate Student Loan Trust will be determined by your particular situation.  For instance if the debt in question is for a small amount and you know you are responsible for the debt you may just want to settle your account with the company attempting to collect on the debt.  Often times these debts can be settled for less than the original balance owed.  Obtaining a settlement of 50% or less of the total balance on settlements is not uncommon.  If a settlement isn’t an option then often times a payment plan can be obtained although the total settlement amount will probably be higher.  The option to pay to have a negative item deleted on your credit may also be available but always make sure you get any settlements in writing.

Next if you have other outstanding debts including the National Collegiate Student Loan Trust debt and your debt load is over $10K then you may want to speak to an attorney regarding filing for bankruptcy.  Filing for bankruptcy will stop a debt collector from collecting on a debt immediately.  A Chapter 7 bankruptcy will eliminate all of your unsecured debt in most cases, while a Chapter 13 bankruptcy will give you a payment plan over 36-60 months to pay on your debts in which you may or may not have to pay the full amount back depending on your income and family size.  Since National Collegiate Student Loan Trust is a student loan, this will not be discharged in bankruptcy.

If your goal is simply to buy some time in which to obtain funds to settle the debt or you want to fight the lawsuit and you have already been served with a summons and complaint then it is advisable to file an answer to the summons and complaint.  The answer must be filed in the court where your law suit is and a copy sent to the law firm as well.  The answer outlines all of your defenses and responses to the allegations in the complaint.  Filing an answer will help you avoid a default judgment and allow for you to buy time and force the law firm to produce paperwork from the original creditor showing you owe the debt.  If you do file an answer, it is likely that National Collegiate Student Loan Trust at some point in the next couple of months will file a motion for summary judgment stating that they have evidence that you owe the debt and that they should win their case.  At this point the law firm would be required to actually produce such evidence.  If you don’t have a valid defense to these allegations you will want to settle your case to avoid further attorney fee’s and interest being entered against you.  Otherwise you have the option to continue in litigation and see if the company will produce evidence that you owe on a debt and a court will determine whether National Collegiate Student Loan Trust has  standing to collect on the debt.  Often times third party debt collectors cannot produce such documentation but the only way to find out for sure is to see your case to the end, often ending with a trial.  If for some reason you have let a default judgment get entered against you and you need to stop a wage garnishment a bankruptcy can always be filed after the fact and any wages taken within 90 days of the bankruptcy filing may be returned to you.

If you live in Washington State and have received a letter or a legal summons and complaint from National Collegiate Student Loan Trust and have questions about it, give Symmes Law Group a call at 206-682-7975 to learn about your options.

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How to Manage Old Debt After Recent Supreme Court Ruling

Old DebtIt’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.

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Can an Attorney Help You Buy and Sell Real Estate?

attorney to buy and sell real estateYes! 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.

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