The Allmand Law Firm, PLLC Difference

Unlike most bankruptcy firms in the Dallas / Fort-Worth area, Allmand Law Firm, PLLC spends the time to understand the complete financial picture for every one of our clients. We provide resources, tools and advice to address the unique needs of North Texans.

Does Discharged Debt from Bankruptcy Get Reported on Federal Income Taxes?

Posted By Allmand Law Firm, PLLC || 21-Mar-2014

th (2)

Does Discharged Debt from Bankruptcy Get Reported on Federal Income Taxes?

During tax season the question often arises regarding discharged debt and whether it has to be claimed as income on federal income taxes. This widely depends on whether the creditor acknowledges discharged debt as being canceled debt. If this is the case debtors may receive a 1099c form from the creditor to include when they file their return. In many cases debtors will not have to worry about this, but this is something you can review with your bankruptcy attorney for further clarification on exceptions to the rule.

Income recorded on federal income taxes often does not include discharged debt from bankruptcy. The IRS may provide more information for clarity on your unique situation. This is true for any bankruptcy chapter filed including Chapter 7 , 11 and Chapter 13. The debt has to be successfully discharged, meaning if you filed for protection and your case was dismissed before the debt could be discharged, the exception may not apply.

In some cases if you were declared insolvent you may not have to worry about reporting anything on your federal income tax return. In short, this is where it is proved that what you owed debt wise was valued more than the value of your assets at fair market value, including items with a lien or those that may be considered exempt under the bankruptcy code. The Internal Revenue Service (IRS) has additional information on this matter you can review via publication p4681.


Categories: Bankruptcy
Blog Home