Will I Have To Pay Income Taxes On Discharged Debt In A Bankruptcy?

Income taxes will not have to be paid on discharged debt in a bankruptcy. This is one of the most common misconceptions of bankruptcy, and many accountants are not even aware that this is true. In some cases, banks will issue a 1099 form, which is imputed income for a debt that was cancelled. This is something that banks are not permitted to do, though it likely happens in error more often than not. As long as a debt is a discharged debt, it is not a taxable event.

Does Having Bankruptcy On Someone’s Record Affect Job Opportunities?

Employers are not permitted to use a past bankruptcy against someone for the purposes of hiring them. Many government employees who have clearance worry that they will lose it or be barred from obtaining a hiring level of clearance due to having filed for bankruptcy. However, clearance is granted for people who have demonstrated that they are trustworthy and will not steal, so having a past bankruptcy may actually help an individual by showing that they dealt with the issue on their own. In addition, if someone is financially sound, then they are less likely to steal, and this is something that the government will consider.

How Quickly After A Bankruptcy Do You See People Getting Homes And Cars And Items Of That Nature?

If someone has filed a Chapter 7 bankruptcy, banks will typically start to consider loaning money to them two years after the discharge. During those two years, a person should be rebuilding their credit and demonstrating that they are on the right path. Car loans, on the other hand, could be issued any time after a Chapter 7 bankruptcy. There are many factors that a bank will consider when determining whether or not someone will qualify for a loan. They are not just going to look at the bankruptcy; they will look at their credit report, debt, and budget. If the individual has improved their income or reduced their expenses, then the bank will see that they can actually afford a car. Since the individual will not owe any creditors after a bankruptcy, they will actually be considered less of a risk. While they might be given a slightly higher interest rate, they will likely receive a loan for a car.

For more information on Paying Income Taxes On Discharged Debt, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling (877) 606-1222 today.