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FiveStarLaw, Attorney
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Hello. in 2009 my debt included a mortgage $102,000 (five yrs

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Hello. in 2009 my debt included a mortgage $102,000 (five yrs ago I put down 20%) the home intially cost $138k. I also have/had two second mortgages...Using the home as collateral. One $56000 second mortgage, the other $42000. I also had $56000 of credit card debt (unsecured) ; 13000 of that was with a ''business'' credit card co., and a car loan for $11000. My debt was $250k.
My assets, including a 401 k plan of $34k, was $48ooo.
I lost almost half of my income; work cutbacks. I filed for a chap.7 from a 13 filed earlier in 2009. The courts approved the chapt 7 request and I was discharged in Oct. 2009. The car was taken back, my first mortgagor filed for a petition for 'relief of stay' during the chapt. 7 ordeal. They've foreclosed.
The question I have is I received a 1099-c from the 'business'' cc co. for $13000. How many more will I get? Am I insolvent? Will I get one from the mortgage co'.s? Are these considered gains? What must I claim as my gross?where do I receive forms if so.
Submitted: 4 years ago.
Category: Bankruptcy Law
Expert:  FiveStarLaw replied 4 years ago.
Hello,

It does not appear that you will need to recognize any relief of indebtedness income. Here is why

typically, when the lender accepts less than what you owe on the full balance, this difference will become discharge of indebtedness income and it is taxed as “ordinary income” (See 26 U.S.C. § 61 and §§ 1001 through 1016).

Here are the common exceptions to the IRS discharge of indebtedness income rule. There may be other exceptions as well. You can determine if any apply to your situation.


Common Exceptions:

1. Debts discharged through bankruptcy are not considered taxable income.

2. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.

3. Personal residence. The Mortgage Forgiveness Debt Relief Act of 2007 excludes from taxation discharges of up to $2 million of indebtedness that is secured by a principal residence and is incurred in the acquisition, construction or substantial improvement of the principal residence. This special relief is available for three years beginning January 1, 2007, and ending December 31, 2009
4. If you are insolvent when the debt is canceled, some or all of the canceled debt may not be taxable to you.


Therefore, the discharge of indebtedness income may not be considered taxable income under exception #1


I hope that this helps.
FiveStarLaw, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36550
Experience: Bankruptcy Lawyer. Experienced.
FiveStarLaw and 2 other Bankruptcy Law Specialists are ready to help you
Customer: replied 4 years ago.
what forms will i need? must i even mention the 1099-c to the irs?
Expert:  FiveStarLaw replied 4 years ago.
I do not know which forms that you would file as that is more of a compliance issue

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