I have successfully filed for Ch.7 bankruptcy and my debts are discharged. My brother thinks my discharged debts may be considered income by the fed. gov. and I may have to pay fed. Income tax on these. Question: Under any circumstances, will I have to pay income tax related to my discharged debts? Many thanks for any answers to this question.
Sean

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Originally Posted by chunderface

I have successfully filed for Ch.7 bankruptcy and my debts are discharged. My brother thinks my discharged debts may be considered income by the fed. gov. and I may have to pay fed. income tax on these. Question: Under any circumstances, will I have to pay income tax related to my discharged debts? Many thanks for any answers to this question.
Sean

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I say no but ask your Attorney - he/she should have covered this with you at the very beginning.

If you don't pay a debt just because you don't want to and the statute runs, that debt doesn't become income to you.

So - my vote is no. Unofficial, but no.

I have helped many people file bankruptcy, and no, none was ever considered income.

Had the debt merely been forgiven by the lender, and a 1099 issued, it can beconsidered income ( except for houses which is now exempt at least temp.)

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Originally Posted by Fr_Chuck

I have helped many people file bankruptcy, and no, none was ever considered income.

Had the debt merely been forgiven by the lender, and a 1099 issued, it can beconsidered income ( except for houses which is now exempt at least temp.)

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OK, I received two lender's 1099A's, one of which says I am personally liable, the other says I am not. My bankruptcy was final in Oct. 2007. I am attempting to do my taxes online... and the way I read it, beings I owed more on the house than it's worth.. I have to show proof of insolvency(?) or pay taxes. Help, I am lost!

The 1099 is proof of income, in the past they were required to be included as income. Which means if you had 100,000 in unpaid debt, you woulld have to pay tax on that.

But now I am not sure what you do with them on your tax filing, but at least for now that non paid debt from a foreclosure is no longer taxable.

No, filing bankruptcy is not required, you just don't pay taxes on the 1099 from the debt that was not paid now. Before you would have.

As for as personally liable, yes, you still owe them the money, so they can sue you, they can get a judgement, garnish your wages if allowed in your state, freeze your bank accounts and so on.
And yes, almost always a house never sells for even 1/2 of its value at a foreclosure sale. So you will still owe them lots of money. Just not payable on the taxes.