What if any are the tax inplications of debt discharged in a chapter 7 bankruptcy?

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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. :)
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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 l

Can a chapter 7 bankruptcy discharge a civil judgment on a credit card debt?

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.\n.

What can you do if you are overwhelmed with debt but had a chapter 7 bankruptcy discharged five years ago?

Answer . \nThere 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 v

Can the petitioner in an open chapter 7 continue to pay debts that are not dischargeable in the bankruptcy?

\n. \n based on my personal instance \n. \n. \nI went through this same process and I continued to pay my mortgage while we waited on all the other items to be discharg

If the debt for your mortgage was discharged in chapter 7 bankruptcy must you vacate the property?

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

Will Chapter 7 Bankruptcy discharge state sales tax?

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! I

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 mai

Can a chapter 7 bankruptcy discharge a civil judgment on utilities 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