San Jose Bankruptcy Attorney explains why filing for Chapter 13 bankruptcy protection should not affect your tax return.
San Jose Bankruptcy Attorney explains why filing for Chapter 13 bankruptcy protection should not affect your tax return.
Questions regarding bankruptcy and taxes are quite common. Filing for Chapter 13 bankruptcy should have a minimal effect on your personal tax situation. Unless your tax advisor, San Jose bankruptcy attorney or the bankruptcy trustee instruct you otherwise, you should continue to file the same returns as you have in previous years. It is a requirement of the bankruptcy law that you keep current with the tax filings while your bankruptcy petition is before the court (see 11 U.S.C. § 521).
Unlike debt settlement processes, debt discharged in a bankruptcy is not subject to income tax. If you have debt forgiven in a settlement process, you may receive a 1099 form that lists the forgiven debt as a form of income that you must declare on your income tax return. Debts discharged in bankruptcy are not listed as income, and do not have to be declared as income for tax purposes
Some people get confused during the Chapter 13 process because they are no longer making payments directly to their mortgage company and mistakenly think that the payments are no longer deductible. The payment is still the same, regardless of whether you send it directly to the mortgage company or to the bankruptcy trustee, who is making payments on your behalf to satisfy your bankruptcy obligations. You can still deduct the payments if they meet the allowable tax deduction criteria. Examples of allowable deductions would include the home mortgage interest deduction, payments for state and local taxes, real estate taxes, medical expenses (deductible in the year paid and not the year the expenses were incurred) and student loan interest. To decide what is best for you, please consult an attorney or tax advisor.
If you have a question regarding Bankruptcy in San Jose please contact us at 408.279.2288 or visit www.bkanswers.com and we can connect you with one of our experienced San Jose Bankruptcy Attorneys. After you have spoken with one of our San Jose bankruptcy attorneys we can schedule you a free face to face appointment in our office location nearest you. Our team of San Jose Bankruptcy Lawyers can assist you with all aspects of your case. If you are have questions about filing a chapter 7 bankruptcy, a chapter 11 bankruptcy, a chapter 13 bankruptcy, lien stripping, cram down, stopping a foreclosure or wage garnishment, discharging debt, etc. we can help! We have bankruptcy attorneys located throughout California who can assist your financial needs. Please feel free to complete our free bankruptcy evaluation and we can quickly determine if you are a qualified candidate for bankruptcy.
