What would you like to do?
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 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. :)
37 people found this useful
Was this answer useful?
Thanks for the feedback!
At what point in a Chapter 7 bankruptcy is it considered final with no new debts eligible for discharge?
When you file for Chapter 7 bankruptcy, you are responsible for listing all of your debts. Some debts are generally not dischargable (i.e. child support, most taxes, student …loans, secured debts, etc.). When you receive a discharge for dischargeable debts, the discharge generally applies to debts listed in your bankruptcy filing and any subsequent amendments. The discharge does not apply to date incurred after you filed bankruptcy and generally does not apply to debts that you failed to list in the bankruptcy.
Answer Yes, unless the debt was fraudulent incurred. If the debt was fraudulently incurred, the creditor could file an action objecting to the discharge of that …debt. One important thing to remember is that judgment LIENS will survive the bankruptcy unless the debtor files a petition under Section 522 of the bankruptcy code to remove the lien. If you file for bankruptcy, make sure you tell your attorney about any judgments against you so the attorney can investigate whether or not any liens exist.
What can you do if you are overwhelmed with debt but had a chapter 7 bankruptcy discharged five years ago?
Answer There are some options available under such circumstances, it is possible to file a Chapter 13, but most consumer's find it very difficult to manage… under the very stringent repayment schedule. Some consumer's opt for debt consolidation, however the consumer should be very cautious and do extensive research before entering into an agreement with such businessess. There are many reputable agencies and also those that are just plain dishonest. Be advised many companies offering "financial fixes" are actually predatory lenders and should be avoided at all costs.
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.
TAXES in CHAPTER 7 sorry to tell you , but in Texas property taxes can not be discharged in any bankruptcy.As laws change every year it would be best to check with the city y…ou live in
Are all debts automatically discharge in chapter 7 bankruptcy for a bankruptcy that occurred in 1988?
If a debt was listed on a Bankruptcy that you filed and the Bankruptcy went through then that debt is permanently discharged with a Chapter 7.
Presuming you mean on the cancellation of indebtedness income - generally not.
Frankly...I've never hear of a mortgage debt being discharged without the underlying asset, the property, being given to the mortgage holder. It is possible your confused...th…at the property was transferred (or sold) and wasn't worth as much as the debt (mortgage) you owed...and the deficiency (the amount you would still owe...was discharged. But the house isn't yours...and you are a "tennant in adverse possesion".
Absolutely not. Even in the BKs with the highest powered of lawyers...and Corporations....the last things done before filing BK is pay the sales and withholding taxes! In …most all states or taxing jurisdictions, (with California being one large notable exception), these are not taxes on "you", but money the business collects from others (customers or employees) on behalf of the State. They are trust funds....they not only won't ever be discharged....they carry direct, pierce any corporate shield, to the officers and involved parties, responsibility. Better take care of them one way or another ASAP. In the few places they may be legally considered the responsibility of the vendor, they may be discharged in the BK, (as situational as anything else), and would be a priorty claim and even allowed an extended bar date for filing a proof of claim.
How are you notified if a creditor is disputing a debt discharge when chapter 7 bankruptcy is filed?
If I understand your question, the creditor would file a motion with the court objecting to the debt in question being discharged. The creditor has to serve the motion (…by mail) on you. The motion would let you know of when the hearing is scheduled. You should go to the court on that date and time to oppose the motion if you have any opposition. You should also file a written answer letting the court know that you oppose the motion and why. Go to the court and ask them if they can show you how to file an answer. Creditors have a deadline for when they can file such a motion. The deadline date is listed on the bankruptcy notice the court mailed to you and your creditors. If the motion is brought after that date, it is no good. If you haven't received such a motion by that date, then you are in the clear.
Yes. As far as BK is concerned, they are just like any other debt.
No type of bankruptcy, whether chapter 7, 11, or 13 discharges a civil or criminal judgment against you. Those are considered non-dischargeable debts and will remain with you… until you pay them. Be sure to familiarize yourself with what will and will not be discharged before filing for bankruptcy as you may find that much of your debt is nondischargeable in which case bankruptcy may not be the option for you.
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.
In some instances, yes. If the debt was not for your principal residence, forgiveness through bankruptcy is considered income and, hence, taxable.
The debtor does not "file" a 1099C. The debtor may receive a 1099C from the creditor which also sends it to the IRS. The discharge of the debt in bankruptcy nullifies the 1099…C. There is a form or a part of the 1040 set for disclosing this information to the IRS.