Bankruptcy & Income Taxes

Community Leader
Registered: 03-17-2003
Bankruptcy & Income Taxes
3
Wed, 02-01-2006 - 3:10pm
This is a reminder that you should NOT be receiving IRS Form 1099 related to any secured debt (car, boat, yacht , airplane, house, etc.) you discharged in your bankruptcy. Most lenders know this, but there are times a computer hiccups and spits out a 1099 in error.

If you happen to receive a 1099, do not ignore it. It is notice to you that the creditor reported the debt as income to you and you will have to pay income tax on that money. Call the creditor and inform them the 1099 was issued in error and they must correct it immediately and issue you a corrected 1099.

Carolyn
Community Leader
Registered: 03-17-2003
Thu, 03-09-2006 - 11:46am

Back to the top.

Secured property included in your bankruptcy releases you from all obligation. The discharge is absolute. You should NOT receive a 1099-MISC. If you have received a 1099-MISC it was an error. Contact the creditor, inform them the property was included in bankruptcy and they must file a revised 1099-MISC with the IRS, your state tax board (if applicable) and to you. Unless a revised 1099-MISC is prepared and filed to correct the error you are not off the hook.

This is only for those who have resolved their debt through bankruptcy.

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Those who have settled their debts with foreclosure (real property), and/or allowed a lender to repo property (such as a car) will receive a 1099-MISC. It is not an error. You must include the 1099-MISC as income and pay tax on the amount.

If you have questions concerning preparation of your taxes, please contact your tax advisor, tax attorney, tax preparer, or other tax professional.

Carolyn

iVillage Member
Registered: 08-28-2005
Thu, 03-09-2006 - 11:31pm
We did our bankruptcy last yr, and just did our taxes and had no issues w/ the Bankruptcy!!
I'm just posting this b/c i was so nervous and it wasn't even an issue so I stressed for nothing!!
Nancy
Community Leader
Registered: 03-17-2003
Fri, 03-10-2006 - 12:06am

Hi Nancy!

I chose the Celebration Balloons icon for your perfect bankruptcy. That's exactly what should have happened with all those account - nothing! No 1099-MISC.

Welcome Back and Huge Hugs

Carolyn