I filed bankruptcy last Jan, and was issued a discharge in May of 2005. (No asset case). I have been reading about you have to claim discharged debts on income taxes via taxable attributes. I have no idea what this is talking about. Please help
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I filed bankruptcy last Jan, and was issued a discharge in May of 2005. (No asset case). I have been reading about you have to claim discharged debts on income taxes via taxable attributes. I have no idea what this is talking about. Please help
If you negotiate a reduction in a debt outside of bankruptcy, the creditor will typically report the amount of the reduction to the IRS and it will be taxable as income. (e.g., you have a $8,000.00 debt and negotiate a reduction to $3,000.00. The Lender will report the $5,000.00 reduction to the IRS, which will generally treat that amount as taxable income.)
That does not apply in bankruptcy - that is, you should not have any tax obligation for debts discharged in bankruptcy. The bankrupt estate would file a tax return, but the trustee should attend to that as outlined here.