How Can Bankruptcy Benefit Real Estate Investors and Consumers?

Posted on April 19, 2019 by Richard Symmes Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Estate Planning & Probate, Media & Press, Real Estate Law

Last week attorney Richard Symmes had the opportunity to be on one of our favorite podcasts for real estate investing, the Seattle Investors Club Podcast. In the episode you will learn about attorney Richard Symmes’ background and experience in bankruptcy and foreclosure defense and how can bankruptcy benefit real estate investors and consumers alike moving forward. You can check out the episode here:

Can Bankruptcy Benefit Real Estate Investors and Consumers?

The answer is yes. As we talked about in the episode every real estate investor when they come across a distressed home owner should be looking to provide options to those in need. The better understanding an investor has of those tools, the better you will be able to help those in need. Those tools can consist of Chapter 7 bankruptcy, Chapter 13 Bankruptcy, Loan Modification or Foreclosure Fairness mediation.

If these options do not make sense, the best option for the homeowner might actually be selling the property so that they can have equity to move forward and the real estate investor can have the property they were seeking to rehab or hold. It’s a win/win situation if everybody is on the same page and everybody is in agreement as to what is the best options moving forward for everybody. The first step is to check out where the distressed owner is on the Washington state foreclosure timeline and offer some options from there.

How Can Foreclosure Fairness Mediation Benefit Distressed Homeowners?

In Washington State we have a law called the Foreclosure Fairness Act (FFA) (RCW 64.24.163). This act allows homeowners with loans from most big banks (smaller bank or individual lenders are exempt from the law), to apply to the state through an attorney or housing counselor for mediation. This mediation may be requested once a notice of default is received by the homeowner and up to 20 days after a trustee sale date is recorded with the county. This act also only applies to primary residence and not investment properties. Once the state has accepted the referral a mediator will be appointed and local attorneys for the bank will be notified. The goal of the mediation is to help a distressed homeowner get a modification to stay in the residence.

The best benefit of the FFA mediation is that once the mediation process is started, a homeowner cannot be foreclosed upon until the mediation process is complete. This process can last several months if not longer so it will allow the distressed homeowner to buy time to weigh their options as well as have the opportunity to be reviewed for a loan modification without living in fear of a foreclosure date or having to file for bankruptcy. If the distressed homeowner is denied a loan modification and mediation session is closed, the foreclosure process may start up again. If necessary a bankruptcy could be filed at a later date to delay a sale further.

How Can Chapter 7 Bankruptcy Benefit Distressed Homeowners?

In most cases involving distressed homeowners looking to stop a foreclosure sale, chapter 7 bankruptcy does not make the most sense. Chapter 7 bankruptcy is a start fresh, liquidation bankruptcy, although most times, debtors get to keep all their assets under a certain amount per exemption laws. The filing of the bankruptcy will stop a foreclosure sale due to the bankruptcy automatic stay, but it allows a bankruptcy trustee to liquidate assets for the benefit of creditors.

In Washington, homeowners can protect up to $125,000 of equity in a primary residence located in Washington State by utilizing the Washington State bankruptcy exemptions. If there is the potential to receive any more than that amount a bankruptcy trustee is likely to sell the property for the benefit of creditors. Distressed homeowners also need to watch out for trustee’s trying to short sell a property for the benefit of creditors if there is no equity and the mortgage is delinquent. Court have allowed trustees to “carve out” funds from the short sale for the benefit of creditors. This means the bank takes the property back, and gives money to the trustee for doing their dirty work and these funds benefit the distressed homeowners creditors.

This means that chapter 7 bankruptcy is not the best option for distressed home owners unless they have significant unsecured debt like credit cards or medical debt and they are ok with the possibility they may lose their home if the trustee wants to sell it for the benefit of their creditors. There are also other factors that may impact whether a chapter 7 makes sense or is possible and a bankruptcy attorney should be consulted prior to filing anything.

How Can Chapter 13 Bankruptcy Benefit Distressed Homeowners?

Chapter 13 bankruptcy is likely going to be the best and most tool to a distressed homeowner. A chapter 13 bankruptcy can be filed anytime prior to the actual foreclosure sale in order to stop a foreclosure sale from happening. A chapter 13 bankruptcy allows a distressed homeowner to make up payments they are behind over 5 years while also making their normal mortgage payments. Being able to afford such a plan is key if this option is going to be a viable long term plan. Filing a chapter 13 bankruptcy can also eliminate other unsecured debts as part of a case and the amount a debtor needs to pay is based on equity in assets, family size and household gross income.

If a complete chapter 13 bankruptcy case is not filed, it may be referred to as an emergency filing that consists of a distressed homeowners name, address, social security number and a list of their creditors. From here the distressed homeowner can decide to file the balance of the required bankruptcy schedules or let their case get dismissed. By filing an emergency case it can buy a distressed homeowner 30-45 days on average to figure out their next plan of action, whether that be catching up on a loan, a loan modification or selling to a third party. Filing the balance or the required bankruptcy schedules will allow a debtor to buy more time, but they will also have to start making payment to the chapter 13 bankruptcy trustee. If no payments are made or the balance of schedules are not filed a bankruptcy case can be dismissed or in the rare case, converted to a chapter 7 liquidation if a debtor has been abusing the process or is a serial bankruptcy filer. If a debtor wishes to sell a property while in a bankruptcy, it would require court approval or the dismissal of the case.

If you come across homeowners who are looking for options to stop a foreclosure sale in your real estate business, give Symmes Law Group a call at 206-682-7975 to speak to a foreclosure defense attorney and learn about how we may be able to help.

What are Possible Remedies for An Unlawful Foreclosure?

Posted on March 2, 2019 by Richard Symmes Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Foreclosure Defense, Media & Press

If your home has been foreclosed upon, you may be looking for possible remedies for what you may consider an unlawful foreclosure. In Washington state most foreclosure sales have to go through the Washington state non judicial foreclosure process. It is also common during this process for a bank to change servicers which can cause confusion as to who is doing what and whether your trustee sale date has been rescheduled. You should know that under RCW 61.24.040 a servicer change during the foreclosure process is not reason alone to reset the foreclosure process and furthermore courts have ruled that a homeowner was still notified of the possible sale and could have taken court action prior to the trustee sale date. Therefore, it is very difficult to get a property back after a foreclosure sale has occurred if the servicer and trustee will not voluntarily rescind the sale. This also means that homeowners should be pro active to either file bankruptcy to stop a foreclosure sale or file a lawsuit months in advance if possible for injunctive relief to make sure a sale does not happen before you have your day in court. Bankruptcy is the easiest and most cost efficient way to stop a sale, but bankruptcy is not for everyone as circumstances may very from one consumer to another. If filing for injunctive relief in Washington state superior court, you must allow enough time to give all parties notice of the lawsuit and get the case on the courts calendar which can take time.

With that said, after a foreclosure sale, although chances of getting a sale rescinded are slim, a homeowner may be entitled to damages if they believe the foreclosure sale was unlawful, although expect a long costly litigation fight from the bank. In order to mitigate legal fee’s the first step is to report the issue to the Washington State Attorney General if you think you have been taken advantage of by the bank. For more information on remedies for an unlawful foreclosure you can license to attorney Richard Symmes discuss this topic on 1150 KKNW radio here:

Below are possible causes of action for damages if you think your property has been unlawfully foreclosed upon.

File a Claim under the Washington Consumer Protection Act (RCW 19.86)

In order to protect themselves from unfair and deceptive practices, consumers are allowed to bring private suits against individuals and businesses that engage in unfair or deceptive business practices. The consumer may recover actual damages, treble damages ($25,000 maximum in most cases), and attorney’s fees. Two types of actions may be brought under the law: 1) By the Attorney General or 2) By a consumer (under more stringent requirements).

What does a consumer have to prove to win a CPA case

In 1986, the Washington Supreme Court established the current five-part test for a private cause of action: the consumer must show:

an unfair or deceptive act or practice,
occurring in the course of trade or commerce
that affects the public interest and
causes harm to the consumers’ business or property (Damages)
Damages caused by the business actions.
1. Emotional damages even if related to the business or property damage are not recoverable under the CPA

Courts have also ruled that Debt collection is subject to the WA CPA (Stevens v Omni Insurance – Div. I 2007).

File a Claim under the Breach of Duty of Good Faith under the WA Deed of Trust Act RCW 61.24.010(4)

The Washington state deed of trust act states that “The trustee has a duty of good faith to the borrower, beneficiary, and grantor.” Further, the WA supreme court has stated “Trustee’s have obligations to all the parties to the deed, including the homeowner: Bain v. Metropolitan Mortgage Group (2012).

File a Claim under Negligence or intentional Misrepresentation

In order to win a claim for damages under negligence theory a consumer would have to prove the following:

Defendant supplied information for use in a business transaction that was false
The defendant knew or should have known the information was supplied to guide the plaintiff in a business transaction
The defendant was negligent in obtaining or communicating the false information
The plaintiff relied on the false information
The plaintiffs reliance was reasonable
The false information proximately caused the plaintiff damages.

These are just some of the possible remedies for an unlawful foreclosure. If you are considering filing a lawsuit against your bank, you should be prepared to be able to finance such a claim and expect push back from the lender or trustee who filed the claim. Claims can often be appealed and tied up in court for years, therefore stopping a sale before it happens through bankruptcy or a pre foreclosure lawsuit is ideal, with the ladder offering no gaurantees a judge will stop your sale. if you want the closest thing to a sure thing to stop a foreclosure sale, filing bankruptcy due to the automatic stay may be the best way to go.

If you are in need of stopping an upcoming foreclosure sale, give Symmes Law Group a call at 206-682-7975 to get the counsel you need and learn about your options.

How Do I Transfer Real Estate in a Probate?

Posted on January 29, 2019 by Richard Symmes Posted in Estate Planning & Probate, Media & Press, Real Estate Law

How do I transfer real estate in probate

Dealing with the assets, real estate and belongings of a love one who has recently passed away is never easy. If the loved one who passed (“The Decedent”) had assets of over $100,000 in Washington State then their estate must go through a process called probate. The purpose of the probate process is for the personal representative of the decedent to notify all potential creditors of the decedent of the passing, for creditors to make any claims to assets of the probate estate, and allowing the personal representative to liquidate and transfer any assets to beneficiaries of the decedent. The First step being able to transfer real estate in a probate is to open a probate case and get a personal representative appointed. Attorney Richard Symmes was on the 1150 KKNW talking about this topic and you can hear the full segment here:

(1) Open a Probate and Get a Personal Representative Appointed in the Probate Case to Transfer Real Estate in a Probate.

A probate case is typically opened in the Superior Court in the county where the decedent lived. If the decedent had a Will, it would name who the chosen personal representative is. This Will would be filed with the court along with a motion appointing the personal representative and an Oath of the Personal Representative. If there is no Will, then a motion seeking to be appointed as the personal representative would need to be filed by a person petitioning to be the personal representative of the decedent. If the family and heirs are in agreement on who the personal representative should be and how assets should be distributed this process can go smoothly. Otherwise, aspects of a probate can be adversarial. Once the motion is approved the personal representative will received “Letters Testamentary” or “Letters of Administration”. These letters will allow a personal representative to act on behalf of the decedent.

(2) Provide Notice to all Beneficiaries and Known Creditors.

Once a personal representative is appointed with non-intervention powers they will need to provide notice to any known beneficiaries and known creditors of the decedents estate. This allows creditors to file claims in the case and beneficiaries to be put on notice of a possible distribution or the right to object to such an appointment or the handling of the probate matter.

(3) Liquidate Assets and Transfer Real Estate in a Probate.

The personal representative is considered a fiduciary, meaning that they are accountable to the beneficiaries for their actions. The personal representative is tasked with making sure the assets of the decedent including real estate, are bequeathed to the proper beneficiaries accordingly. The personal representative may have the power to list for sale a property if it needs to be liquidated or transfer the property to beneficiaries. The personal representative has the right to choose who to hire as legal counsel or as a real estate broker should they need assistance with the probate process or transferring real estate in a probate. The transfer of property is typically done through a personal representative’s deed which transfer’s the property on behalf of the decedents estate to the proper beneficiaries or purchasing party. This deed is different than a typical warranty deed in which a title company would provide if the property is sold in a typical manner and goes through the title and escrow process.

(4) Pay Creditors and Close Out Probate

Once all real estate and property has been liquidated and transferred to the proper beneficiaries and any creditors who have filed claims in the probate case have been paid, the probate case will be ready to close. Any funds or assets remaining prior to closing may then be distributed by the personal representative to the proper beneficiaries per the decedents will if applicable.

(5) Close the Probate

One all assets and real estate has been liquidated or transferred and creditors have been paid, the personal representative may close the probate case and file a Declaration of Completion of Probate or report of final accounting. This report should contain information on who was paid what, expenses of the estate, and any transfers made to beneficiaries.

If you live in Washington State and need assistance with probate or selling or transferring real estate while involved in an active probate, give Symmes Law Group a call at 206-682-7975 to get the counsel you need.

What Happens After Filing Bankruptcy?

Posted on September 28, 2018 by Richard Symmes Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Credit Repair, Foreclosure Defense, Media & Press

One of the most common questions that I am asked as a Seattle bankruptcy attorney is what happens after filing bankruptcy? This is a loaded question and how things transpire after filing bankruptcy will depend on each case individually however I have compiled a list of what most debtors can expect. I discussed this topic on 1150AM KKNW recently and you can listen to the full audio here:

(1) Do I have to Go to Court After Filing Bankruptcy?

Most Consumers who file bankruptcy will need to go to court one time for a 341 meeting of creditors. This meeting generally lasts 5 minutes although you should plan to be at court for about an hour. The purpose of the meeting is to allow the bankruptcy trustee to ask you questions about your assets and financial circumstances. Creditors may attend however that is usually unlikely unless a creditor wants to question you about your business affairs in order to prove some sort of fraud or ask about assets.

(2) Your Credit Will Improve Over Time After Filing Bankruptcy

When you file for bankruptcy, you must list all of your debts, collections, taxes etc. in your bankruptcy petition. Most debt will be discharged (eliminated) once you receive a bankruptcy discharge from the bankruptcy court in about 90 days after filing in a chapter 7 case or after your plan is completed in a chapter 13 case. One of the major factors affecting your credit score is how much unsecured debt you have and how much of your available credit lines are you using. If all your debt goes down to zero, then you are no longer maxing out your credit and your scores will likely rise if they started out lower. Yes it is true that a bankruptcy will show up on your credit report and can stay they for up to ten years, but for most 1 negative items is better than many other debt related negative items appearing on a credit report. After receiving a bankruptcy discharge, consumers should review their credit reports to make sure everything is reporting correctly, showing closed accounts and zero balances. It is advised post filing that you sign up for a secured credit account or two that will report positively to your credit after your case is filed and you can build up your scores from there.

(3) Will I be able to buy a car, a house or obtain credit after filing bankruptcy?

Yes! Once of the most common comments I get from clients after filing for bankruptcy is “Why do I get so many offers to buy cars?” The answer is now that you have filed for bankruptcy, your credit score has likely improved and creditors know you cannot file for bankruptcy for several years. When you file for bankruptcy the information is public record which is how auto dealers may obtain your information to send you mail. The interest rate on the vehicles will of course vary but rest assured you will be able to get a vehicle post filing and most people get to keep the vehicle they already have should they choose to do so. In terms of obtaining a home loan, most lenders will loan to you after it has been 2 years since you have filed for bankruptcy. It should be noted that some apartment complexes do not like renting to bankruptcy filers but usually you can find somebody that will work with your situation.

(4) How Do I deal with non dischargeable debts after filing bankruptcy?

Some consumers have debts that are not dischargeable in bankruptcy. These can include child support, some types of taxes, court fines, student loans or speeding tickets (Dischargeable only in Ch. 13). For these types of debts, chapter 13 bankruptcy can allow for you to pay off these debts over a period of 5 years. Outside of bankruptcy it is bet to negotiate a payment plan with the individual creditor and see if you can budget the payments to something that you can afford.

(5) What if a Creditor Contacts Me After Filing For Bankruptcy?

Creditors are forbidden from contacting consumers after filing for bankruptcy due to the bankruptcy discharge order. With that said if you have a debt that is not dischargeable then a creditor can contact you regarding that debt and you should set a payment plan per #3 above. If a creditor is contacting you post bankruptcy discharge when the debt should have been dischargeable it is likely they did not receive notice for one reason or another. You should contact the creditor and provide them with your case number and filing date. If they require additional information you can mail or fax them notice of the discharge and 99% of the time this will clear up any confusion.

(6) What if a Creditor is Still Reporting Negative Items on My Credit After Filing Bankruptcy?

If a Creditor is still reporting negative items on your credit report or an account is reporting as having a balance when it should show zero after filing bankruptcy you will need to dispute these items with the creditor and the credit bureaus reporting the negative items. You should always send your disputes in writing through the mail in order to have any possible claims in the future. Under the Fair Credit Reporting Act, if mis information continues to be reported you may have a claim and be entitled to $1,000 in damages.

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

How Can You Protect Yourself as a Real Estate Investor Washington State?

Posted on June 30, 2018 by Richard Symmes Posted in Media & Press, Real Estate Law

If you are thinking about becoming or are a real estate investor in Washington State you will want to know how to protect yourself as a real estate investor to make sure that you set yourself up for success and minimize risk whenever possible. With that said you will want to weigh the costs of having the maximum protection with what each option is actually going to do for you and the costs of such protection. Below I have outlined some common questions and answers and various information that can help you in your real estate investment business. This is all meant to be general advice and you should consult your own accountant or real estate attorney should you have questions about your specific situation.

You can also listen to real estate investor attorney Richard Symmes on 1150 AM KKNW on how you can protect yourself as a real estate investor in Washington State here:

What is the easiest way to protect yourself as a real estate investor in Washington State?

At a minimum I would recommend that you hold property in an LLC and create a separate LLC for each property which would insulate each property from creditor claims against each business. An LLC provides for limited liability should a tenant or other party file a lawsuit against you or your business during a lease term or a rehab. Forming multiple LLC’s protects all the other properties from creditors of each property. This also keeps your personal assets safe and unreachable by a creditor. However real estate investors should be aware of something called piercing the corporate veil in which an individual may be held liable even if you have formed a business. The best way to avoid this from happening is to make sure you keep all business activities separate from your personal activities and bank accounts and actually treat the LLC’s you have set up as a separate business from yourself.

Should I form a Series LLC in a state other than Washington to Hold Washington Property?

Washington state does not have a legal entity called a series LLC, however several other states do allow for the creation of a series LLC. A series LLC allows for the owner to create one LLC holding company as a parent company and then as many other series businesses as part of a LLC stemming from the parent company. So it would be XYZ company which holds XYZ 1, XYZ 2, XYZ 3 etc. This allows for the creation of 1 LLC and filing fee’s with the state of incorporate and as many other sub companies that you want in the series.

A series LLC can be useful if you own several properties so you can create numerous series companies within the same LLC. With that said this type of business is not ideal if you just have a single or a few properties. You would also have to keep in mind that if you form a series LLC in a state other than Washington, the business would need to have an agent for service in the home state in which the company was formed and you would likely have to pay taxes of the state in which you have formed the company if applicable. Finally, you have to remember that Washington does not recognize the series LLC which may cause you issues down the road if there are disputes or litigation which require court intervention.

You would have to weigh these drawbacks with the cost to form several normal LLC’s in Washington and the fact that Washington does not have a state income tax. Therefore, if you just have a couple properties my advice would be to just stick with a Washington state LLC. If you own numerous properties then I can see how a series LLC can be useful but it may not be worth the additional cost time and effort.

Is the Transfer of Real Property to an LLC Taxable?

Most investors have to get a loan in order to invest in their next project and usually can get better interest rates if the loan is taken out personally and recorded against the property. This means that the property will initially be held in an individuals name and the investor will later want to transfer the interest to an LLC.

Do I have to Pay Washington State Tax on a property transfer to an LLC?

So, if you do transfer a property from an LLC, there is generally no Washington state excise tax associated with a quit claim deed transaction if there is no consideration (value) paid for the property. If there are taxes assessed it would be in accordance with the Washington Real Estate Excise Tax (REET). The tax also applies to sales or transfers of controlling interests in entities (e.g., corporations, partnerships, limited liability companies, etc.) that own real property. The exemptions to this tax can be found in the REET statutes, chapter 82.45 RCW, or in the rules or regulations adopted by the Department of Revenue, chapter 458-61A WAC.

Consideration means money or anything of value, either tangible or intangible, paid or delivered, or contracted to be paid or delivered, including the performance of services, in return for the transfer of real property. The REET applies to both transfers when two properties are exchanged and there is no exemption when the transaction involves an IRC §1031 exchange. Consideration also includes the amount of any lien, mortgage, indebtedness or other encumbrance given to secure the purchase price or remaining on the property at the time of sale, including the assumption of an underlying debt. A sale where the buyer assumes the underlying debt and pays no additional consideration is fully subject to REET.

Do I have to Pay Federal Tax on a property transfer to an LLC?

The answer to this question depend on how your LLC is taxed. If it is a sole member LLC and taxed as a disregarded entity there will be no federal tax incurred. If the LLC is taxed as a partnership or corporation the answer may be different based on several factors. You should consult your accountant.

Will My Mortgage Lender Call My Note Due If I Transfer a Property to an LLC?

Most likely not, but the due on sale clause in your mortgage note (not in every mortgage note but most) is more likely to be enforced if you fall behind on payments. The due on sale clause allows a mortgage company to call a note due in full should you sell or transfer your property so there is some risk to doing this.

The Garn St. Germain Act of 1982 addresses the basic conflict between homeowners looking to protect their assets, and the bank’s insistence that the homeowner buy the property in their own name. The Garn St. Germain Act prevents lenders from enforcing the due-on-sale clause when residential properties are transferred into a revocable trust and there is no change to the rights of occupancy.

It should be noted that if you have a loan that is not federally backed, then the Garn St. Germain Act may not apply.

Should I Transfer My Investment Property to a Revocable Trust or Land Trust?

A common question that many real estate investors have is whether they should transfer their property into a revocable trust or “Land Trust”. A revocable family trust can include real estate as well as other assets set aside for beneficiaries vs. a “land trust” generally just includes 1 property held in the trust. The main purpose of transferring property into a trust as a real estate investor would be to avoid the due on sale clause discussed above and for privacy as a trust is not a document that is filed publicly in your county’s recorders office.

States that don’t have specific rules for land trusts such as Washington state, simply govern them using standard trust laws based on the state laws available. In almost all cases, the investors who establish a “land trust” are establishing a revocable trust. The land trust laws and trust laws in general are clear that a revocable trust does not give the grantor (the guy that sets up the trust and puts the property into the trust) any type of asset protection. It doesn’t matter who the beneficiary is. All trust laws state that if the trust is revocable, the courts can require the grantor, when they are sued for any reason, to “revoke” the trust and give the property in the trust to the grantor’s creditors.

The goal of the land trust is to make it look like you the investor do not have any real estate in your name if you are sued. This is wishful thinking however as most attorneys and insurance companies may look into or ask questions through litigation discovery that could reveal who the true trustee or beneficiary is of the land trust and open you up to being discovered as the true owner. Think of the land trust as more of a smoke screen or costume designed to trick aggressive creditors into thinking you don’t own any assets of major value.

A land trust has three parts: a grantor, a trustee, and a beneficiary. When you choose to form a land trust, your lawyer can serve as your nominee trustee and you the real estate investor can become the designated beneficiary and eventually assign your interest to an LLC you own. This allows the investor to reap the rewards of property ownership, such as investment income, without being publicly identified as the owner. The trustee’s role is to manage the trust itself and the investor should be named as the successor trustee once your initial trustee resigns so that the real estate investors name does not appear on any publicly recorded documents.

As you can see a land trustee can be very complicated and defeat the purpose of anonymity if it is not set up correctly. Furthermore, keeping your assets in a land trust can cause issues when you try to sell or refinance your property as you most likely will have to transfer the property back to your personal name, the acting trustee or beneficiary prior to moving forward with refinancing plans depending on the situation.

Personally, I think going through this land trust process is more trouble than it is worth unless anonymity is of utmost importance. While it is nice if your name does not show up on public records for purposes of asset protection, this strategy can be easily defeated should a creditor initiate a lawsuit and delve deeper into your finances and holdings. With that said, if you believe that creditors won’t file a lawsuit because they can’t find any assets in your name, this may be a worthy asset protection strategy.

If you live in Washington State and are looking for a real estate investment attorney to assist with the protection of your real estate, give Symmes Law Group a call at 206-682-7975 to get the counsel you need.

Tagged with: Protect Yourself as a Real Estate Investor

How Do Mortgage Payments Work?

Posted on October 18, 2017 by Richard Symmes Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Credit Repair, Foreclosure Defense, Media & Press, Real Estate Law

Figuring 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.

Tagged with: mortgage payments

Can a Business File Bankruptcy?

Posted on July 30, 2017 by Richard Symmes Posted in Bankruptcy, Business Law, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Media & Press

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.

How to Manage Old Debt After Recent Supreme Court Ruling

Posted on May 29, 2017 by Richard Symmes Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Media & Press, Seattle Debt Settlement

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.

Tagged with: old debt

Can an Attorney Help You Buy and Sell Real Estate?

Posted on May 3, 2017 by Richard Symmes Posted in Business Law, Media & Press, Real Estate Law

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

Posted on March 26, 2017 by Richard Symmes Posted in Bankruptcy, Chapter 13 Bankruptcy, Chapter 7 Bankruptcy, Foreclosure Defense, Media & Press

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….

NOT!

Filing bankruptcy doesn’t mean you’ll lose everything.

The two most common types of consumer bankruptcy are Chapter 7, or liquidation, and Chapter 13, sometimes called a wage earner’s plan.

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.

Tagged with: Bankruptcy myths

Symmes Law Group | Media & Press