Bankruptcy and Taxpayer Dispute Attorney

Helping Taxpayers in the Pierce County and Tacoma Areas

A taxpayer engaged in a Federal tax dispute has the opportunity to select the forum that will decide the case among four separate courts. Although the choice may be subject to certain legal and practical restrictions, those courts are as follows:

1. The United States Tax Court. The majority of tax cases are litigated in the United States Tax Court as this allows taxpayers to commence a tax case before paying the tax liability asserted by the IRS. While the Tax Court is headquartered in Washington, D.C., its 19 judges hear cases in about 80 cities throughout the U.S.

A Tax Court case usually begins after the taxpayer has received a Notice of Deficiency from the IRS. The taxpayer must then file a petition in Tax Court within 90 days of the mailing date on the IRS notice. The Tax Court also has jurisdiction to hear non-deficiency cases in disputes involving opposition to IRS levies and liens, IRS denials of requests for innocent spouse relief, an offer in compromise, penalty abatement or other collection action.

These non-deficiency cases are commenced in the Tax Court by the taxpayer filing a petition after exhausting all IRS appeal rights pursuant to a request for a collection due process hearing. The Tax Court can also be utilized to dispute the IRS assertion of transferee liability, certain kinds of declaratory relief, the adjustment of partnership allocations and items, and the reclassification of workers as employees or independent contractors

Trial procedure in the Tax Court is much the same as trial procedure in the District Court in nonjury cases except the rules of evidence tend to be more lenient. Most Tax Court cases are settled by mutual agreement but if a trial is conducted, a decision will be rendered setting forth findings of fact and an opinion.

Decisions of the Tax Court, except for cases involving disputes under $50,000 conducted under the Court’s small tax case procedure, are appealable to the United States Courts of Appeals.

2. The United States Court of Federal Claims. The U.S. Court of Federal Claims is centered in Washington, D.C., but can hold trials in other courts around the country. Its jurisdiction is limited to hearing claims for money that arise from the U.S. Constitution, federal statutes, executive regulations, or federal contracts.

Included in this jurisdiction is the authority to hear claims by taxpayers for refunds of federal taxes paid, but the taxpayer bringing the claim must have first paid the deficiency to the IRS. Although many tax-refund suits are docketed in the Claims Court, it is considerably less specialized than the Tax Court, however, its judges may be presumed to have more expertise in the tax field than a District Court judge.

3. The United States District Courts. In contrast to the Tax Court and the Claims Court, which hear cases from all over the country, the District Court only hears cases arising within its district in its own state. Thus the District Court judge will be more familiar with local conditions that may bear on a tax case and may be in a better position to judge the credibility of local witnesses. The taxpayer bringing the claim must have first paid the deficiency determined by the IRS.

4. The United States Bankruptcy Court. Each of the federal judicial districts also has a Bankruptcy Court which operates under the supervision of the District Court. The bankruptcy courts are broadly empowered to hear any issue arising under the Bankruptcy Code, including federal tax issues arising in bankruptcy proceedings.

If a taxpayer otherwise qualifies for bankruptcy, there may be significant advantages to having the tax issue decided in Bankruptcy Court, as the Bankruptcy Court tends to be more debtor/taxpayer friendly. Bankruptcy Court appeals are taken to the District Court before they can be heard by the circuit courts.

For the Tax Court and District Court, appeals can be taken either by the taxpayer or the IRS to one of the eleven regionally-based U.S. Courts of Appeals. For the Court of Federal Claims, appeals are to the Court of Appeals for the Federal Circuit, a specialized appeals court, but one with national jurisdiction. This diversity allows forum shopping as a taxpayer can choose to bring a case before the court most likely to provide a favorable opinion based on the taxpayer’s knowledge of the precedents of the various courts.

Contact your Tacoma bankruptcy and taxpayer dispute attorney to discuss your options today.

Bankruptcy Lawyer Discusses Dangers of PayDay Loans

Assisting debtors in Tacoma and Pierce County Washington

For those hardworking individuals who exist from one paycheck to the next without any savings or reserves for financial emergencies, payday loans have become both a lifeline and a sinking ship.

The problem is that once you take out one of these high-interest loans, which generally must be repaid within the next two to four weeks, it will leave you short again to meet necessary payments for food, rent and utilities.

The only solution becomes to take one payday loan after another, known as rolling over, paying up to 15 percent interest for two weeks (an annualized rate of 390 percent interest) and being always under the collection gun.

Pursuant to the Washington StateDepartment of Financial Institutions, a payday loan is a small, unsecured, high interest, short-term cash loan. In most cases, consumers write a post-dated, personal check for the advance amount, plus a fee. The lender holds the check for the loan period and then deposits it, or the customer returns with cash to reclaim the check.

The law was revised as of January 1, 2010, to provide more consumer protections – here are the basic provisions:

• You may only borrow a total of $700 or 30 percent of your gross monthly income, whichever is less.
• Your information will be registered in a state-wide database, ensuring that all payday lenders have your most up-to-date loan information.
• You may only take eight payday loans per 12-month period.
• If you are unable to repay your loan before your loan is due, you may request an installment plan with no additional fees (note that the interest rate remains the same).
• If you currently have an installment plan you may not receive another loan.
• Lenders may not harass or intimidate you when collecting a loan.
• Maximum Loan Term: 45 days 
  Maximum Loan Amount: $700 
  Maximum Fee: 15 percent on the first $500 and 10 percent above $500.

As a Tacoma attorney providing bankruptcy services and proven debt solutions, I have had numerous clients with several outstanding payday loans that they could not repay. Were these individuals intentionally taking advantage of the system? Absolutely not; it was simply the payday loan system claiming more victims.

In the State of Washington, with broad exceptions, any interest charged in excess of the statutory maximum, which is currently 12 percent, is illegal and usurious. The most significant exception to the statutory maximum interest rate is in transactions primarily for agricultural, commercial, investment, or business purposes, with consumer transactions expressly excluded.

So how is it that payday loan companies often charge 300 percent interest or more? Doesn’t this sound like the old fashioned loan sharking practice your neighbor’s “uncle Vinny” had down the street that we have all seen in mobster movies?

The use of federally chartered state banks initially allowed these schemes. It is similar to the way credit cards from out-of-state banks are able to charge higher interest rates than Washington State allows.

Federal law allows national banks to “export” their interest rates, along with their product, to other states. The way it works is payday lenders affiliate with a national bank and use the bank’s charter to get around usury laws and other consumer protection laws to charge exorbitantly high-interest rates on payday loans. Essentially, the payday lender can claim it’s the bank making the loan.

However, although the loan’s paperwork may have had the bank’s name on it, the payday lender was the one advancing and collecting the money. The national Office of the Comptroller of the Currency has put restrictions on this partnering of national banks but the payday loan industry has become firmly established and is here to stay.

Contact us to discuss your financial situation and learn how an experienced debt reduction and bankruptcy attorney can help you.

Experienced Bankruptcy Attorney Helping with Chapter 7 and Chapter 13

Serving all of Pierce County and the Tacoma Areas

BAPCA, or the Bankruptcy Abuse Prevention and Consumer Protection Act, was passed by the federal government and made effective on October 17, 2005. The purpose of the act was to reduce the number of Chapter 7 bankruptcy filings and increase the number of Chapter 13 filings.

This legislation was sought by creditors because Chapter 13 debtors have to partially repay their debts, whereas, with Chapter 7, most debts are not repaid and are discharged.

Critics of BAPCA included consumer advocates, bankruptcy judges and legal scholars who argued that the bill’s sponsors exaggerated claims of bankruptcy fraud and that a number of BAPCPA’s provisions favored the credit card companies who lobbied heavily for passage of the bill.

The passage of BAPCPA resulted in dramatically reduced bankruptcy filings across the nation. In the Western District of Washington, which includes the bankruptcy courts in Tacoma and Seattle, bankruptcy filings went from 35,360 cases filed in 2005 to 8,459 cases filed in 2006.

This decrease was due in large part to public misconceptions about the continued availability of bankruptcy relief, implementation of the new laws in the bankruptcy court system, and increases costs now associated with filing for bankruptcy. There was also a great rush to file for bankruptcy relief in 2005 before the effective date of the new laws.

As the years have passed, bankruptcy filings have increased to pre-BAPCA and historic levels.

For 2010, there were 26,875 bankruptcy cases filed in the Western District of Washington. It is clear now that BAPCPA has preserved for working people the relief that the Bankruptcy Code affords as honest people do make regrettable decisions, get sick, lose jobs, get divorced and have other bad things happen to them.

As the U.S. Supreme Court stated regarding the purpose of the bankruptcy law: “It gives to the honest but unfortunate debtor…a new opportunity in life and a clear field for future effort, unhampered by the pressure and discouragement of preexisting debt.”

Contact our offices today to discuss chapter 7 or chapter 13 bankruptcies with an experienced bankruptcy and debt consolidation attorney.

Bankruptcy Attorney Discusses How to Keep Your Home

Serving Homeowners in Pierce County and Tacoma, Washington

Many people considering Chapter 7 bankruptcy worry about losing their biggest asset—their home—in the process of getting rid of their debts. Discuss your situation with a bankruptcy lawyer to discover your options. In many instances, you can keep your home.

Homeowners who desperately need the debt protections afforded by Chapter 7, more often than not, delay their bankruptcy filing – waiting for another solution that never appears as their situation continues to deteriorate. They make the common mistakes of refinancing their homes, tapping into their retirement funds, or selling their homes at a greatly reduced price.

These are not only unnecessary measures, but often foolish and end up wasting a person or couple’s nest egg.

The fact of the matter is, in most bankruptcy cases, the bankruptcy trustee will not liquidate your home to pay off creditor claims. In fact, under current bankruptcy law, most clients find that even if they have significant equity in their home, it is fully protected from liquidation by federal and Washington exemption laws.

Your home equity, under federal exemptions is exempt up to $21,625, as long as your home is used as your primary residence. If you represent half of a married couple, this amount is doubled, as both of you are allowed to claim this exemption in residential real estate. If you have more equity than that, you can utilize your Washington state homestead exemption up to $125,000.00 in equity.

Not sure of your net equity for the purposes of bankruptcy?

To determine equity take the value of your home, subtract any mortgages or other liens you have attached to it, and then deduct hypothetical costs of sale of 10%. The result is your equity.

For example, if your house is worth $400,000 and you have a first mortgage on which you owe $250,000, and the costs of selling your home (realtor fees, excise taxes, tile report, escrow fees, etc.) would be approximately 10% of the value, or $40,000, you have $110,000 in net equity. If you selected the Washington state homestead exemption protecting up to $125,000 in equity, your home would appear to be safe—even in Chapter 7 bankruptcy.

You can get a fresh start through bankruptcy and keep your home. You will still have to make the mortgage payments but you will be relieved of credit card, medical, and other unsecured debts.

Bankruptcy is not shameful, it is your right, and it is your opportunity for a fresh start in these tough economic times. Let an experienced bankruptcy attorney in Tacoma help you. Call us today!

Washington Bankruptcy Attorney

Serving Debtors in Tacoma and Pierce County

Bankruptcy filings rose 20 percent in the 12-month period ending June 30, 2010, according to statistics released by the Administrative Office of the U.S. Courts.

A total of 1,572,597 bankruptcy cases were filed in federal courts in that period, compared to 1,306,315 bankruptcy cases filed in the 12-month period ending June 30, 2009. This is the highest number of bankruptcy filings for any period since many of the provisions of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (“BAPCPA”) took effect.

For the American people, that is a remarkable rate of one case every 20 seconds. This underscores the fact, which is well known in bankruptcy practitioner circles, that bankruptcy protection is still readily available after BAPCPA.

It is also very clear that bankruptcy protection is needed now more than ever, for example:

• The economic recession is continuing with little relief in sight
• High unemployment rates
• Foreclosures are being filed at a record pace
• Collection of credit card and medical debt is more aggressive than ever

Bankruptcy is the most important remedy which you have as a debtor facing economic hardship.

A Chapter 7 Bankruptcy can provide you with a release of your indebtedness while a Chapter 13 Reorganization can be utilized to save your home.

Bankruptcy is not shameful, it is your right, and it is your opportunity for a fresh start in these tough economic times. Call today to speak with a knowledgeable bankruptcy and debt relief attorney.