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How does filing Chapter 7 effect my tax returns?

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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.




laurel188
Debt Samaritan
Posts: 110
Credits: 2586.45

Sub: #1 hello! according to bankruptcy courts, tax refunds or a portion
Wed, 02/27/2008 - 01:54

hello!
according to bankruptcy courts, tax refunds or a portion of it can be considered as a part of your assets, which are taken up by the trustee appointed by the court, who in turn converts them into cash to pay up to your creditors. but there are exemptions on them and it differs from state to state, and you need to find out the laws of your state.
however, assets are those that you possessed at the time of filing bankruptcy. so only the tax refund for that particular time or year will be considered as asset. the tax refund of the subsequent years will remain with you.




2nband

Posts: 2282
Credits: 46918.776020618

Sub: #2 I was in KS the first time I had to file (sep & divorce). Depen
Wed, 02/27/2008 - 08:00

I was in KS the first time I had to file (sep & divorce). Depending on when you file. Mine was filed toward the end of the year, I believe and they kept 3/4 of my tax return that year. I would talk to your attorney, if you have one, and see what he/she has to say. They would be more able to answer that question in regards to your particular state.




Unregistered

Sub: #3 I guess I didn't word that right or something because my questio
Thu, 02/28/2008 - 06:36

I guess I didn't word that right or something because my question isn't so much about what I would be getting back. I have heard that when you are filing your taxes and you get to the question about capital gain you have to claim all discharged debt as a capital gain. I wanted to know if this was true or not because I have about $45,000 in debt that is going to be discharged with the Chapter 7. I am worried that next year I will file taxes for 2008 and have to claim this $45,000 as a capital gain.

As far as what I get back, my lawyer told me to just wait until after the 341 meeting to file and the tax return would then be mine to keep.




girlndebt
Posts: 151
Credits: 5773.2

Sub: #4 Chapter 7
Sat, 03/01/2008 - 17:03

I am no professional but from my knowledge-NO you would not owe taxes on the debt that was discharged through bankruptcy. I know if you settle debts you would receive a 1099 and YES that would have to be claimed but then there is the subject of being insolvent. Talk to your attorney. He will know. If I see mine soon, I will ask as well. Good luck to ya.




socksfullofrocks
Posts: 498
Credits: 172.85

Sub: #5 girl in debt! you are so helpful and nice!
Thu, 03/06/2008 - 23:21

girl in debt! you are so helpful and nice!




Unregistered

Sub: #6 Thanks for your reply, I just had my 341 yesterday. Apparently t
Thu, 03/27/2008 - 06:35

Thanks for your reply, I just had my 341 yesterday. Apparently the rule is any discharged debt is a capital gain, but bankruptsy is an exception to the rule so it does not count. As fr my taxe return for 2007, it falls under my "wildcard exemptions" and I get to keep the entire thing. Finally my life can begin again!




jarjoecharclin
Posts: 22
Credits: 637.1

Sub: #7 we just did this well my fiance did. We were afraid that cause w
Thu, 03/27/2008 - 19:19

we just did this well my fiance did. We were afraid that cause we canceled the debt that we would be taxed on it. You know like you are when you settle. And nope they dont even take the bankruptcy into consideration on your tax return




Tiffany99

Posts: 1059
Credits: 20375.55

Sub: #8 I am glad I read this thread, as I was wondering how my discharg
Tue, 04/29/2008 - 11:33

I am glad I read this thread, as I was wondering how my discharged debt was going to affect my 2008 tax return. I'm glad it won't be an issue. Since the debt discharged in bankruptcy is exempt from capital gains, I'm assuming the amount of debt discharged doesn't even have to be listed on the tax return?




Unregistered

Sub: #9 bankruptcy
Fri, 01/23/2009 - 16:16

WE recently filed chapter7 and it was discharged in August 2008, i am concerned how this would affect our income tax for this year tax return. Our accountant believes we would have to claim the amount discharged on our taxes as income and pay tax on that amount. We live in PA




SOAPLADY


Debt Samaritan
Posts: 17191
Credits: 474465.88869987

Sub: #10 Your accountant needs to do some studying. You dont claim anyth
Fri, 01/23/2009 - 17:04

Your accountant needs to do some studying. You dont claim anything you discharge in bankruptcy.




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