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A few years ago I lost a house to the trustees. It went on a…

A few years ago I...
A few years ago I lost a house to the trustees. It went on a short sale. Now the Franchise tax board says I Tax Board says I "earned" $184,000.00 and that I owe them $20,000.00 in taxes. Of course I received no money, was/am registered as a "homeless person", have temporary housing that is in dispute and have no steady employment.
Is it legal for me to bundle up my hospital bills,credit card debt, and taxes into a bankruptcy? If yes is this a Chapter 7 or Chapter 11? What is the difference? Also the ads on television keep speaking of a "slim window of opportunity". What is this? Do you recommend any agency that can help me with this as I can't afford to pay H&R Block or anybody like that.
Thank you.
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Answered in 39 minutes by:
5/28/2010
Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36,715
Experience: Bankruptcy Lawyer. Experienced.
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Hello,

I am the JustAnswer expert that will be helping you today. I am a lawyer with 25 years experience. Although I am not your attorney, I hope that I can give you helpful legal information.

The taxes would not be discharged in bankruptcy. That said it appears that you fall within an exemption for taxation on the relief of indebtedness income that resulted from the foreclosure of your principal residence. You will need to file Form 540X, Amended Individual Income Tax Return, in order to claim debt relief exemption.

Here is how it works

Typically if the lender accepts less than what you owe on the full balance of the loan, the difference will become discharge of indebtedness income and it is taxed as “ordinary income” on both the state and federal level.

On the federal level there is an exceptionto the IRS discharge of indebtedness income rule for cancellation of debt on a principal residence.

California has a similar provision that applies to discharges of indebtedness on personal residences that occurred in 2007 through 2012 of up to $800,000
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Customer reply replied 8 years ago
Thank you very much. You have brought me out of total darkness into a bit more light.
I'm one of those people who is math and document derelict. I do have some of the paperwork from the short sale, some of the paperwork showing my income, and some showing bills.
At this writing I am under-employed and have just been notified that I must vacate the apartment I'm in by June 30th (through no fault of my own by city decree). So I am looking for someone who can assist me with unraveling all those papers, filing the taxes (I'm divorced, my husband used to handle this)and possibly teaching me something that will allow me to be more self-reliant.
I have a few phone numbers of agencies advertised on radio and tv and fear that they may require payment. I'd called for help earlier this year and was put on a waiting list then not called back by a few.
Since i don't know what else to do is it wise to walk into the IRS office, declare ignorance, and face the consequences? I hope that life will change so I'll find more employment in the future but Social Security may be my next move (I am 62 years old) Any advice you can give will be greatly helpful.
Customer reply replied 8 years ago
Also your note says to click "Accept" so you can get paid but I don't see the accept button in the email. Please advise.
Thanks
Since i don't know what else to do is it wise to walk into the IRS office, declare ignorance, and face the consequences?
It appears that you do not have any cancellation of debt income to recognize since you fall within the primary residence exemption.That said, a local attorney would likely be a good choice to assist you.

You can click accept on this answer and then the site will pay me.

Thank you very much! If I can be of assistance in the future, please ask for FLAandNYLAWYER
Ellen
Ellen, Attorney
Category: Bankruptcy Law
Satisfied Customers: 36,715
Experience: Bankruptcy Lawyer. Experienced.
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DISCLAIMER: Answers from Experts on JustAnswer are not substitutes for the advice of an attorney. JustAnswer is a public forum and questions and responses are not private or confidential or protected by the attorney-client privilege. The Expert above is not your attorney, and the response above is not legal advice. You should not read this response to propose specific action or address specific circumstances, but only to give you a sense of general principles of law that might affect the situation you describe. Application of these general principles to particular circumstances must be done by a lawyer who has spoken with you in confidence, learned all relevant information, and explored various options. Before acting on these general principles, you should hire a lawyer licensed to practice law in the jurisdiction to which your question pertains.

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