Clients have asked us about the affects of discharging debts on income tax. This is a great question to ask because in some similar situations, when debt is forgiven, it can be seen as a type of income which can become taxable.
In some real estate situations, if a bank discharges your debt on a home loan, you may be responsible for paying income tax on any debt that is forgiven or discharged in a loan. This would happen usually when debt is simply forgiven from a mortgage owed on a property. Most of the time, you can also avoid paying income tax in this type of forgiveness if you file a bankruptcy because a bankruptcy filing can prove you to be insolvent at the time of the debt forgiveness.
In most cases, you will not have to pay income tax on debts discharged in bankruptcy. In a bankruptcy in California, you will not be responsible for an income taxes due to any discharged debt from a bankruptcy. Bankruptcy Law Professionals has the experience you need to get your debts discharged through bankruptcy for your business or your personal debt.
Contact us for an appointment at any of our offices in Orange County or Riverside to learn all of your rights and how we can help you under bankruptcy protection at 855 257-7671.