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  1. #1
    Join Date
    Mar 2006
    Posts
    6

    Default Filing taxes after a Chapter 7 bankruptcy.

    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

  2. #2
    Join Date
    Sep 2005
    Location
    Behind a Desk
    Posts
    98,846

    Default Discharge of Debts

    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.

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