Debtconsolidationcare: Internet's first get-out-of-debt community
473,117 members

Internet's first get-out-of-debt community 485,133 members


Debt Consolidation Forums Bankruptcy Chapter 7 and Chapter 13

How does filing Chapter 7 effect my tax returns?





Sub: How does filing Chapter 7 effect my tax returns?
Thu, 29/11/2012 10:40

I have heard that when you file bankruptcy you have to claim the debts as a capital gain. Is this true? I am filing a chapter 7 and am worried how much it will cost me next year if I have to claim this $45,000 as a capital gain.



Top menu: 
Bankruptcy
Article Rating: 
Unregistered

Sub: #1 I made $$ due to tax loopholeThu, 11/29/2012 - 10:40



I can only say this was an accidental fine that by paying all my medical bills with credit in the year 2009 I got a huge $5,000 tax return because even paying it with loans or credit cards counts as paying it. Then I had to file bankruptcy in 2010 due to a change in job status and huge credit debt due to those hospital bills. I was granted chapter 7 and didn't have to report it on my taxes, why I say this is kind of a loophole.


Sub: #2 itsamomthing... As far as I know, you will have to mention the fFri, 02/18/2011 - 01:42



itsamomthing... As far as I know, you will have to mention the forgiven debt amount in your tax documents. Have word with a tax adviser and he/she will be able to assist you in a better manner in this case.


Unregistered

Sub: #3 WOW... I was under the assumption that IRS and school loans couThu, 02/17/2011 - 13:55



WOW... I was under the assumption that IRS and school loans could NOT be discharged in a Bankruptcy... you are lucky :D


Unregistered

Sub: #4 We filed CH 7 in 2010, it was discharged in october 2010, do i iThu, 02/17/2011 - 11:25



We filed CH 7 in 2010, it was discharged in october 2010, do i include the discharge amount anywhere on my tax return for the tax year 2010? I am so confused. Our house was not involved in the bankruptcy, we kept that. Thanks much!


Sub: #5 Nekogirl, You are correct. If you met the 5 prong test for theWed, 02/09/2011 - 04:16



Nekogirl,

You are correct. If you met the 5 prong test for the taxes, they were discharged. If you did not meet all 5 prongs you still owe the tax. Assuming you met the test and have now discharged all taxes, penalties and interest along with any other debt you may have had, you will not incur a tax consequence. There simply is no "forgiveness of debt" income when you discharge debt through a bk. (See IRC Section 108 - I think that's the Section #)

As to receiving 1099's, the creditor technically does not have to issue one unless the creditor is aware that the debt was related to a business venture. Some creditors will issue them anyway. If you get one then you use the form found at:

http://www.irs.gov/pub/ir s-pdf/f982.pdf

You should consult with a qualified CPA before completing your tax returns. Using a CPA will ensure proper preparation of the tax returns.

Best of luck.

Des.


Sub: #6 As far as I know, back taxes do not get discharged in bankruptcyWed, 02/09/2011 - 02:15



As far as I know, back taxes do not get discharged in bankruptcy filing. Nevertheless, the debts that have been forgiven in your bankruptcy filing will be considered as your income and you'll have to pay taxes on it.


Unregistered

Sub: #7 Hello... I just filed chapter 7 in Maine. I don't have any assTue, 02/08/2011 - 06:33



Hello...

I just filed chapter 7 in Maine. I don't have any assets. Hard to believe, I know. You ask why I would file bankruptcy then. Well, it was to clear up money that I owed the IRS from 5 years ago. I owed the IRS 15,000 (which includes late fees and interest but the original balance was 10K) and it was income tax. So, it was discharged in a chapter 7 bankruptcy after 3 years and some stipulations. I had a couple of collection accounts and 3 credit cards two that were under $600 and one that was over 5 years old that was around $1200.

My question is: I need to do my 2010 taxes and I the bankruptcy was finalized as of December 2010. I haven't received any 1099-C forms to date.

Do I need to claim this bankruptcy in my taxes as income? Do i need to include that 982 form that everyone on this form refers to from the IRS website? Will I have to pay taxes on the IRS debt that was discharged? That is the real concern...I don't care about the collection accounts or the minor credit card stuff.

I have contacted several Tax Preparers and My attorney (he tells me they aren't tax specialist so they don't give that sort of advice and I need to have my taxes done professionally by a tax attorney or preparer). I can't afford a tax attorney. But I also can't afford another mess on my hands so I am so confused and lost here. Any help would be great.


SOAPLADY
SOAPLADY


Debt Samaritan
Posts: 17094
Credits: 376486.34553311 Send message to SOAPLADY

Sub: #8 Quote:He also told me that we could get back the money that we pFri, 07/02/2010 - 19:05



Quote:
He also told me that we could get back the money that we paid the debt reduction service and also the money that we already paid off to the 2 creditors, does anyone know this to be true?


You talked to attorney....hopefully a bankruptcy attorney. He should have explained this to you in more detail. The payments would be considered preferential payments.

How to Deal with Illegal Loans..OhioGal's Primer
http://www.debtconsolidationcare.com...allenders.html
PDL's are ILLEGAL in the following states...
AR, AZ, CT, GA, ME, MD, MA, NJ, NY, NC, PA, VT AND DC
OH AND NH have very restrictive low cost interest rate laws.

SOL for all states
http://www.debtconsolidationcare.com...imitation.html


Unregistered

Sub: #9 My husband and I have been in this debt reduction program for a Fri, 07/02/2010 - 16:30



My husband and I have been in this debt reduction program for a year and a half, so far 2 credit cards have been settled, another one just file against us in court without our knowledge and we have been ordered to start paying 10% of my husband income to this card so we are considering filing chapter 7 so the rest of the cards can't do the same..I talked to a lawyer today and he said that our property was safe because it falls under 100,000 in value and our cars are over 10 years old and have over l00,000 mileage so they can't take that either. He also told me that we could get back the money that we paid the debt reduction service and also the money that we already paid off to the 2 creditors, does anyone know this to be true? Also, not all of our cards are in the debt program, do we have to include the ones that we are making ontime payments on?


Sub: #10 Quote:Originally Posted by lisawhite9Blackbeasst, when you file Tue, 06/29/2010 - 13:35



Quote:
Originally Posted by lisawhite9
Blackbeasst, when you file chapter 7 bankruptcy, all your assets will be taken into consideration. The bankruptcy trustee will consider all your available assets in order to pay off your creditors. The tax returns too comes under your assets. However, some parts of your assets are exempt from this. Now, whether or not your tax return can be taken depends on the time you filed your tax returns. You can consult a different attorney regarding the tax returns.


thanks lisa! i am filing single chapter 7 and my wife will not have any income in 2010. we have already gotten our 2009 return. my attorney should be filing hopefully no later then the end of july. are you saying there is a chance they can take the 2009 return or would it be the 2010 return? and if they do it should only be a 1 time deal right?


Pages

Add new comment

Full HTML

  • Web page addresses and e-mail addresses turn into links automatically.

Filtered HTML

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <blockquote> <code> <ul> <ol> <li> <dl> <dt> <dd><img>
  • Lines and paragraphs break automatically.

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
CAPTCHA
This question (Case Insensitive) is for testing whether you are a human visitor and to prevent automated spam submissions.
Image CAPTCHA
Enter the characters shown in the image.
Share post


DEBTCC "Share and Win iPad" Contest

Follow and like DEBTCC



& "Get Social" for your Chance to Win iPad!!

WIN A FREE iPad

Get Social for your Chance to Win iPad

Page loaded in 1.023 seconds.