One of the benefits of bankruptcy is the debt is discharged with no tax implications. The law specifies that a discharged debt cannot be collected, and that inludes being collected by the IRS. Another common scenario is when a house if foreclosed on, and the Debtor is upside down on the mortgage. There is usually a deficiency that remains. That deficiency is also considered income and must be claimed as such under the Tax Laws. This can then cause many people to owe the IRS money, which in most instances, would not be a dischargeable debt.
The best thing for a Debtor to do in that situation would be to file either a Chapter 7 or Chapter 13 bankruptcy and have the debt discharged instead of reported to the IRS as income.
What is feasibility?
How do you overcome this? It is a difficult thing to overcome if you are not generating additional income. If, at the time of filing, a spouse was not working and now they are, then it may be a simple thing to overcome and show the trustee that you are able to make the payments. In some cases it may be impossible. You may have to reconsider your situation. You may need to consider looking for a room-mate, or possibly letting something go, both of which will help lower your trustee payments.
If you have any concerns that about an objection that arises from the trustee, get with your attorney immediately to see what actions need to be taken to resolve the objection.
For more information visit http://www.bankrupcy-
# # #
Bankruptcy After Foreclosure distributes information through its network of websites, blogs, press releases, and newsletters.
