What would you like to do?
Not always. There are some exceptions. The most common situations when cancellation of debt income is not taxable involve:
- Qualified principal residence indebtedness: This is the exception created by the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
- Bankruptcy: Debts discharged through bankruptcy are not considered taxable income.
- Insolvency: If you are insolvent when the debt is cancelled, some or all of the cancelled debt may not be taxable to you. You are insolvent when your total debts are more than the fair market value of your total assets.
- Certain farm debts: If you incurred the debt directly in operation of a farm, more than half your income from the prior three years was from farming, and the loan was owed to a person or agency regularly engaged in lending, your cancelled debt is generally not considered taxable income.
- Non-recourse loans: A non-recourse loan is a loan for which the lender's only remedy in case of default is to repossess the property being financed or used as collateral. That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. However, it may result in other tax consequences.
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If you cannot pay your reaffirmed debts can your discharged bankruptcy be reopened to add these debts?
More than likely the issue would be, how much time has elapsed. Reaffirmed debts are usually secured debts, and adding them to the BK wouldn't help much. Unless you are tryin…g to "rescue" your equity from foreclosure. You can take back a reaff 60 days after the reaff is filed, or anytime before discharge, whichever is later. If you are not in that time frame, you are out of luck. If you filed a 7, try filing a 13 now and discharge those debts (you'll have to pay back some of it)
This is an intriguing question considering that the IRS does consider forgiven debt to be income normally. However, I have never seen the IRS pursue any of my clients for inc…ome taxes due to forgiven debt in bankruptcy. I stay as far away from the Tax Code as possible, though the answer may lie in there.Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person.
Chapter 7: This chapter of bankruptcy law provides for a full liquidation of an entity's non-exempt property to satisfy creditors, and discharges all dischargeable debts …This is a legal process under Federal statutes that provides for rehabilitation of a debtor through the discharge of certain debts or through a debt repayment plan over a certain period of time. Creditors cannot contact the debtor during the bankruptcy. They must wait until it is fully discharged. There are three chapters of bankruptcy Answer I can't give a definitive answer, but I can relate what I have seen. I suppose to get a definitive answer one would need to look at the Tax Code, and I stay as far away from that as possible. However, I have never had a client come back and say they had any negative tax implications as a result of discharged debt in bankruptcy. I know the IRS can normally pursue forgiven debt as income, but for some reason (either because the Tax Code doesn't permit them to or because they simply opt not to) the IRS has never pursued any of my clients for forgiven (discharged) debt in bankruptcy to my knowledge. I have had a couple of situations where mortgage companies sent tax statements to clients who surrendered real estate in bankruptcy, but so far we have managed to get those resolved without any negative tax consequences. Please note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts, which I do not warrant, and I am not suggesting any course of action or inaction to any person. Answer While cancelled debt is typically includible under the Internal Revenue Code as gross income, there are certain exceptions: 1. Debt that is cancelled through a bankruptcy is NOT taxable as income, 2. Debt cancelled when you are insolvent is NOT taxable as income to the extent of your insolvency. Therefore, there are no tax implications and it does not have to be reported on the tax return. The creditors will send you a 1099-C for cancellation of debt, but they should also check the "bankruptcy" box. Make sure they do this. :)
Answer . Generally, if you forgot to put items in a Chapter 13 case or a Chapter 7 ASSET case, then you are stuck if you fail to add those creditors before the case closes…. If you forgot to put items in a Chapter 7 NO ASSET case, then you can usually file a Motion to Reopen the case (for which the court charges a $260 fee as of 5/12/07) and then you file an Amended Schedule F (or D or E as is applicable) and add the creditor (for which the court charges a fee of $26 as of 5/12/07). You also have to pay attorneys fees for the attorney who does this for you. \n. \nTo add a debt to an old bankruptcy case, the debt must have been incurred before the case was originally filed unless it was a Chapter 13 converted to Chapter 7, in which case the debt must have been incurred before the case was converted to Chapter 7. \n. \nPlease note that nothing in this posting or in any other posting constitutes legal advice; this is simply my understanding of the facts and law, which I do not warrant, and I am not suggesting any course of action or inaction to any person. Speak to a lawyer for specific advice. If you have any questions, please refer to a lawyer in your jurisdiction. Thanks!
Can the petitioner in an open chapter 7 continue to pay debts that are not dischargeable in the bankruptcy?
based on my personal instance I went through this same process and I continued to pay my mortgage while we waited on all the other items to be d…ischarged. This helped keep my mortgage in good standing for when the discharge was complete. As for other bills, we went ahead and had them all discharged to eliminate all debt, except the mortgage. * Yes, if it is a secured debt the petitioner can continue to make payments. Unsecured debts, (credit cards, personal loans, judgments, etc.) should not be paid as it would give the appearance that the debtor is "favoring" a creditor.
\n. \n Answer \n. \n. \nBasically, most UNsecured types of debts (there are some exceptions I believe, primarilary Student Loans), may be relieved.\nCompensatingly, mo…st above the basic need assets can be seized and sold to pay as much of the debt as possible.\n. \nSecured lenders (who frequently have a clause essentially allowing them to do so if you file bankruptcy) may be able to take the item of security.\n. \n. \n Other Contributor Opinions \n. \n . \n . \nBasically in a chapter 7, all unsecured debts, credit cards, promissory notes, etc., any debt that does not have collateral attached; judgments such as wage garnishments, liens that have not been perfected, student loans that are not federally funded. Goods purchased on merchant accounts are secured by the item bought this type of debt is usually settled by the debtor paying the depreciation amount. \n. \nAll secured debts (real property), child support arrearages, federally funded student loans, most (not all) tax arrearages, and in some instances spousal support (alimony) cannot be discharged.
Answer Yes. Suprisingly it is a fairly low (I believe 7th position) claim against the assets. Answer Generally speaking, income tax debt can be discharg…ed if the tax was assessed more than three years prior to the filing of the bankruptcy petition. Note that it is from the time the tax was actually assessed against you (generally the date you filed the return). So if you filed your 1999 tax return 5 years late, you'd still have a bit of a wait before that would be dischargeable under bankruptcy.
Presuming you mean on the cancellation of indebtedness income - generally not.
Generally, child support, fines and penalties, govt insured student loans....amybe a few more.
We are in bankruptcy. Do we have to pay our income taxes that we owe from 2008 or can they be entered into the bankruptcy debt?
Unfortunately, you will have to pay your income taxes from 2008, even after your bankruptcy is finalized. Federal law prohibits income tax debt from being discharged, so you w…ill still owe, but you may find that they stop attempting collection until after your bankruptcy case is complete. You may want to ask your bankruptcy lawyer if he has tax experience so that he can act as your tax lawyer in dealing with the IRS to settle the debts you owe them as well.
Cancellation of Debt is income. HOWEVER there is a special exemption for bankruptcy cancellations that may be applied in most cases.
Do federal or state taxes pay for debt that is discharged in bankruptcy or do the lenders just eat the loss?
Yes, both Federal & State taxes pay for debt that is discharged in BK And yes, lenders "eat" the loss too. And as seen in the bank and investment and insurance, etc industr…y failures recently, from the mortgages the lenders had to "eat", normal people pay for it oo with the loss of their savings, investments, retirements, homes, jobs, etc. And of course, society itself deteriorates - or shows its deterioration - by having so many members that will not hold to their solemn promises or obligations to reapy what they took from others...trying to amke what is theivery and greed perfectly OK.
Unless it is a tax debt, none. Discharged debts are not income to the debtor.
dont buy as many condoms, and you wont become bankrupt.
All unsecured Debt may be discharged in chapter 7,(credit cards, personal loans, and others) secured debts (such as car loans and mortgage), and other assets will be taken by …the estate, and will be used to repay the creditors, it is very important that you discuss this with your attorney if you are planning to keep your house or car, taxes owed, student loans will not be discharged... ans While virtually all debts MUST be included in your bankruptcy, (it is not a matter of picking and chosing..all must be included), some debts cannot be discharged, just like all assets MUST be listed but not all may be taken. Most noteably: Debts for gov't insured student loans and past and future child support are not dischargeable. Many assets like retirement accounts, household goods, a reasonable car, are not able to be used to satisfy debts.
Q: Are all of the debtor's debts discharged, or only some? A: Not all debts are discharged. The debts discharged vary under each chapter of the Bankruptcy Code. The Code speci…fically excepts various categories of debts from the discharge granted to individual debtors. Therefore, the debtor must still repay those debts after bankruptcy. Congress has determined that these types of debts are not dischargeable for public policy reasons (based either on the nature of the debt or the fact that the debts were incurred due to improper behavior of the debtor, such as the debtor's drunken driving). There are 19 categories of debt excepted from discharge under chapters 7, 11, and 12. A more limited list of exceptions applies to cases under chapter 13. The most common types of nondischargeable debts areCertain types of tax claims,Debts not set forth by the debtor on the lists and schedules the debtor must file with the court,Debts for spousal or child support or alimony,Debts for willful and malicious injuries to person or property,Debts to governmental units for fines and penalties,Debts for most government funded or guaranteed educational loans or benefit overpayments,Debts for personal injury caused by the debtor's operation of a motor vehicle while intoxicated,Debts owed to certain tax-advantaged retirement plans, andDebts for certain condominium or cooperative housing fees. Wanna know more? Go here: http://bankruptcy.findlaw.com/bankruptcy/is-bankruptcy-right/debt-discharge-faq.html
In some instances, yes. If the debt was not for your principal residence, forgiveness through bankruptcy is considered income and, hence, taxable.