Mortgage company files for liquidation

Apply 2 Save Inc. filed bankruptcy Tuesday, nearly one year after the Coeur d’Alene mortgage modification company opened its doors.

Those doors closed last month, shutting out hundreds of employees seeking back wages, and thousands of clients who sought Apply 2 Save’s intervention with banks about to foreclose on their homes.

The company, which is seeking liquidation in U.S. Bankruptcy Court, listed assets of $5.2 million, but $7.8 million in liabilities, mostly to employees and aggrieved clients who did not get the help they paid for.

In April, the State of Idaho sued Apply 2 Save in Kootenai County District Court for violating consumer protection laws, asserting the company was “preying” on desperate homeowners.

Apply 2 Save said it could negotiate restructured mortgages for homeowners facing foreclosure. Some clients paid as much as $1,500 up front for help. But according to an attorney general’s complaint, Apply 2 Save often did nothing or put off clients by repeatedly demanding paperwork already submitted.

Based on more than 170 complaints, the state was seeking $880,000 in civil penalties.

Apply 2 Save owes the state almost $180,000 for unpaid withholding tax and workers compensation premiums.

The Internal Revenue Service is due $1.4 million, according to a court filing almost 1,000 pages in length thanks to a list of creditors 8,000 names long.

How much each might receive is questionable because many clients listed as creditors are also behind $4.8 million in customer receivables that represent the bulk of the assets available for distribution, said Spokane attorney Michael Paukert, who drafted the bankruptcy petition.

“It was a struggle getting this thing together,” he said, in part because Apply 2 Save’s landlord at 7950 Meadowlark Way balked at letting him into the building to gather records.

The company collected revenues of about $4 million during its 11 months in operation. Slightly more than $1 million of that was paid to president and founder Derek Oberholtzer, who said he spent $5 million building the company. According to the petition, he is owed another $1 million.

Los Angeles-based Fair Finance Group LLC, which earlier this spring purchased one-third of Apply 2 Save, is owed $810,000.

“It’s unfortunate the way this thing happened for a lot of people,” Paukert said.