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If you file bankruptcy do you owe income tax on the amount of debts that were discharged?
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 income 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.
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This question has been discussed many times here..and there seems to be no hard and fast rule. Certainly, it depends on several things. Most importantly, is what perio…d the overpayment reflected in the refund really relates to. For example, say it is a refund for a year and you filed BK in Dec of that year. Basically, all of the tax you paid in was from pre-petition...had you had the correct amount withheld (or by estimated payment, hence no refund of overpayment being made), presumably (and rightfully) that additional amount would have been available to pay those creditors. Consider, you could have had more (even 100%) withheld and deposited in your account with the Government, that shouldn't mean you get to essentially just withdraw it now. (Had you put it in a bank account you wouldn't expect to). On the other hand, if you file the BK in January, then virtually all the overpayment is due to earnings post petition...which are actually yours and not part of the bankruptcy. Viewed this way, I think the actions make some sense. Add in any complications, like you don't make earnings evenly through the period...and it's a question needing a reasonable solution you may need to propose to the trustee.
No, discharge of debts through bankruptcy do not create taxable earned income. However, you can have Capital Gains or Losses if any real-estate was disposed in that bankruptcy….
Yes, as a general rule. Taxes of all kinds are not discharged by the bankruptcy process. That means, when it's all over with bankruptcy, you still owe taxes to the f…ederal gorvernment, and any other government. In short, fiiling a petition in bankruptcy and a subsequent discharge will not get you out of paying taxes to the government. It's really easy to filing a petition in bankruptcy; it's very expensive not to do it right; the Bankruptcy Court is just not the same as your Magistrate's court, or the small-claim's court. It's very expensive to do it wrong and you cant do it but every so often (time limits: you just have to see the code. If you have a bankruptcy sitution you really need to see a lawyer who works with bankruptcy.
If a tax debt is owed to the IRS can filing bankruptcy settle this debt and allow you to start over?
Yes you can start over but this does have an extreme barring on your credit. You can include the years prior to three years from the tax year you owed the IRS. However any yea…rs owing after the fact, you will be responsible for. Actually, you can under certain circumstances -- mainly if enough time has gone by (except in cases involving fraud): As a result of Bankruptcy Code Sections 523 and 527, the following IRS tax is generally dischargeable: Tax penalties for non-filing, tax penalties for late payment, tax penalties for late deposit, and tax penalties for late estimated payments; and Income tax, excise tax, and gift tax which is over three years old, has been filed at least two years prior to the bankruptcy petition, and/or has been assessed as an IRS tax audit deficiency for at least 240 days. The above poster is right. I was recently discharged from a bankruptcy. When I filed for bankruptcy I owed money to the IRS. My attorney said as long as it had been THREE YEARS from the tax year that you owed the IRS it can be included in a bankruptcy.
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. :)
Generally, child support, fines and penalties, govt insured student loans....amybe a few more.
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.
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.
In a Chapter 7 case, one can normally reopen a bankruptcy to add a creditor as long as the debt was incurred before the bankruptcy case was filed and the debtor simply forgot …to list the creditor on his or her petition. The court charges a filing fee of $155 to reopen a case and a $26 amendment fee to add the creditor (as of 2/11/05) plus you'll likely owe additional attorneys fees to do all the extra work. However, if one has a mortgage listed in their petition and the debtor reaffirmed the debt, then chances are the debtor is stuck with the debt once the Discharge and 60 days after the reaffirmation agreement is filed with the Court expire. If the debtor had the mortgage listed and didn't reaffirm the debt, then chances are the debtor can get out of the debt. . Under certain circumstances you can add debt after bankruptcy as illustrated by Robinson v.Mann.339F.2d547 (5th Cir.1964). Courts have the discretion to allow amendment of schedules after the expiration of the claims period under exceptional circumstances such as (1) the case is a no-asset one, (2) there is no fraud, and(3) the creditor was omitted through mistake or inadvertence.. In a chapter 7 no asset case, anyone creditor to whom the debtor owed money prior to filing is included in the bankruptcy, whether they were listed on the schedules or not. If an asset is administered, the debtor should attempt to list all creditors prior to the trustee administering assets. If they don't that debt will survive the bankruptcy. In chapter 13 cases, the debts should all be listed prior to confirmation. If they are not, and the creditor cannot share in any distribution of funds, the debt will survive the bankruptcy.
Also keep in mind that liens are not released until the liability is paid in full regardless of the amount was dissolved by the bankruptcy. If you file Offer In Compromis…e, then any equity you have in property will be your offer amount. Liens: Once these requirements are met, a lien is created for the amount of your tax debt. By filing notice of this lien, your creditors are publicly notified that we have a claim against all your property, including property you acquire after the lien is filed. This notice is used by courts to establish priority in certain situations, such as bankruptcy proceedings or sales of real estate. The lien attaches to all your property (such as your house or car) and to all your rights to property (such as your accounts receivable, if you are a business). Caution! Once a lien is filed, your credit rating may be harmed. You may not be able to get a loan to buy a house or a car, get a new credit card, or sign a lease. Therefore it is important that you work to resolve your tax liability as quickly as possible, before lien filing becomes necessary. Yes. But you are much better off to look at other options, including something oficially caled "an offer in compromise". Bankruptcy involves everything you owe and everything you own...not just tax. ANS The above are, well simply wrong: Once a BK is filed, by law, no offers in compromise can be considered. The IRS will not communicate with you about the debt or an offer in compromise any longer.....IT IS AGAINST THE LAW FOR THEM TO DO SO.....it is considered trying to collect a debt, all actions for which MUST be stopped upon a BK filing. The tax due becomes part of the BK and the IRS or other auhtorities, will file claims with the court and these debts will be handled as part of the BK, and are given a priority over many others.
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
$400.00 or more for non-church income and $108.28 for church employee income.
What form do you need to file to have a lien removed after the debt has been discharged in bankruptcy?
Answer A debtor who wishes to reopen a closed bankruptcy case to remove a lien normally has to first file a Motion to Reopen the bankruptcy case with the Bankruptcy …Court. The Bankruptcy Court charges a $155.00 fee to do this (as of today's date, 2/25/05). If the debtor hired a lawyer to do this for him or her (highly advisable) then there will also normally be attorneys fees that the debtor has to pay as well. Once the case is reopened by the Court, the debtor (or more likely his or her attorney) then has to file a Motion to Avoid Judgment Lien pursuant to 11 U.S.C. 522(f)(1). It should be noted that NOT all judgment liens can be avoided by 522(f), only those that "impair an exemption of the debtor" pursuant to 11 U.S.C. 522(f)(2). One should speak to attorney about this. 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 Maybe. It depends upon the amount of time that has elapsed between the BK discharge and the receiving of the tax refund. Generally any refund …that can be seized by the trustee must be pro-rated.
If a spouse files for bankruptcy in a community property state and debts are discharged can the other spouse be held responsible for the discharged amounts?
Maybe; see a lawyer.
Just filed? Just like always, except one would expect that it would be something the administrator will want, along with confirming the status of the account with the IR…S. The business last filing should be after it dissolves.
Under the current bankruptcy law, you have to follow the instructions on the judge's decree. You may come under a category that you owe nothing following the judge's ruling. Y…ou may not. Either read the ruling, get someone to read it to you, or go to the court and purchase a copy to replace the one you lost.