Chapter 13 Bankruptcy Information

Under the U.S. Bankruptcy Code, if a debt is discharged in a bankruptcy case, it does NOT count as taxable income.  Bankruptcy-discharged debt is, therefore, much more powerful than merely canceled debt.  While canceled debt may create an income tax liability, discharged debt does not. See What is a 1099c and what do I do about it?

CANCELED DEBT SOUNDS GOOD

We all know that wage income is taxable.  Take a look at your latest pay stub and remind yourself just how much the government actually takes.

Under the US Bankruptcy Code, if a debt is discharged in a bankruptcy case, it does NOT count as taxable income.  Bankruptcy-discharged debt is, therefore, much more powerful than merely canceled debt.  While canceled debt usually creates an income tax liability, discharged debt does not.

CANCELED DEBT SOUNDS GOOD

We all know that wage income is taxable.  Take a look at your latest paystub and remind yourself just how much the government actually takes.

But what are the tax ramifications of canceled debt?  Is canceled debt treated the same way as regular income?  Will you end up owing the IRS because of a debt settled or canceled by a creditor?

Under the US Bankruptcy Code, if a debt is discharged in a bankruptcy case, it does NOT count as taxable income.  Bankruptcy-discharged debt is, therefore, much more powerful than merely canceled debt.  While canceled debt usually creates an income tax liability, discharged debt does not.

CANCELED DEBT SOUNDS GOOD

We all know that wage income is taxable.  Take a look at your latest paystub and remind yourself just how much the government actually takes.

But what are the tax ramifications of canceled debt?  Is canceled debt treated the same way as regular income?  Will you end up owing the IRS because of a debt settled or canceled by a creditor?

A second mortgage lien in the wife’s individual Chapter 13 bankruptcy case has been stripped by a Court, even though the mortgage and lien were in the name of the wife and her non-filing husband.

Eastern District of Michigan bankruptcy Judge Rhodes wrote the opinion, stripping  second mortgage liens, finding the debts totally unsecured, designated for publication, on two consolidated cases.

In each case, it was agreed that the home was underwater, that is, worth less than the amount owed on the first mortgage.

And, there was a second mortgage in each case.

A second mortgage lien in the wife’s individual Chapter 13 bankruptcy case has been stripped by a Court, even though the mortgage and lien were in the name of the wife and her non-filing husband.

Eastern District of Michigan bankruptcy Judge Rhodes wrote the opinion, stripping  second mortgage liens, finding the debts totally unsecured, designated for publication, on two consolidated cases.

In each case, it was agreed that the home was underwater, that is, worth less than the amount owed on the first mortgage.

And, there was a second mortgage in each case.

Payments on student loans that are guaranteed ultimately by the federal government — the vast majority of student loan debt, in other words — can be garnished from your paycheck.  And it can be done without going to court.

But bankruptcy can stop the garnishment.

Even if you live in a state that prevents garnishment of wages, under federal law, the agency that guaranteed these student loans can issue garnishment orders.

The law provides that they must send you written notice  — at your last known address (so it helps to have your right address on record) — at least 30-days before issuing a garnishment order to your employer.

Three years into the mortgage foreclosure crisis, a major lender has finally announced that it will reduce principal on “underwater” mortgages. Sort of.

According to The New York Times, BoA won’t actually write down loans to the value of the property (which is more than it would get in a foreclosure). Rather (and here’s where it gets confusing):

Bank of America executives said the program would work this way: A borrower owes $250,000 on a house now worth $200,000. Fifty thousand dollars of that balance would be moved into a special interest-free account.

We’ve been spending the last week or so showing you just how simple it is to complete the means test form. Now, we have just one little box that could lead you to pull your hair out.

You need to consider you “projected chapter 13 payment” as well as the “multiplier” which applies to your “projected chapter 13 payment”.

You might as well have been born on Mars than have an understanding of this as a lay person. That’s one reason why I cringe at the thought that one of the mandatory disclosures I must give to you is that you can file a bankruptcy by yourself.

Yesterday, a unanimous Supreme Court concluded that bankruptcy creditors ought to read their mail once in awhile.  Perhaps even pay attention and act upon what they read there.  Otherwise, they have only themselves to blame.

This not so remarkable — yet important — decision involved a complicated — yet simple — case.  A man filed a Chapter 13 plan in 1993.  He included a provision in this plan that would discharge the interest on his student loans — something that normally would require he prove undue hardship through an adversary proceeding.  He mailed a copy of this plan to the lender.  The lender filed a claim asking to be included in the case but did not object to the plan.  So the court approved the plan.  The consumer completed his plan, received his discharge and that should have been the end of it.

There is a simple checklist of things that you need to prepare for filing for bankruptcy.  The first is to change your bank account if you owe any money to the bank where your accounts are located.  If you have a personal loan, a car loan, or even a credit card with that bank, it’s a good idea to close the account and open a new one at a place that you haven’t borrowed from.  Or, if you don’t want to close the account, then open a new account to use, and don’t leave any more in the old account than you can afford to lose.