Hello...my name is XXXXX XXXXX I am a Certified Public Accountant. I look forward to assisting you with your question.
Normally, debt that is forgiven or canceled is a taxable event, as the IRS considers the amount of the original loan income that was never repaid. However, bankruptcy law specifically precludes discharged debt from being considered taxable income.
As long as the debt is discharged in a bankruptcy, and not a debt settlement arrangement, then there will not be a tax result on the discharged debt.
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It was a big help because i have been worrying that i would have tax problems despite of my chapter 13 bankruptcy. i did a 13 thinking i could save my home. but, after 3 temporary modifications, i got declined so i opted to foreclose. but i keep hearing from people that i would still get taxed with my foreclosed home. i'm now holding on to that response of yours. thanks.