Once your Bankruptcy has been completed you will no doubt breathe a sigh of relief that you are now back on track financially, and you know longer have to deal with creditors constantly badgering you. You have probably had some or all of your debt discharged and you are wondering how this relates to your federal income tax.
Taxes Complicate Matters
Some individuals wonder whether the discharge has to be claimed as income for tax purposes. This can be a little complex and is a question that you may want to ask your bankruptcy attorney. It is going to depend on whether the creditor has assumed the debt as being cancelled debt. If this is the case then you may receive a special form that you will have to include when you file your tax return. In most cases this is not something that you will have to be concerned with.
In many cases the discharge of the debt is not included on the federal income tax portion for reporting the income. It can be quite complex and you may find that the IRS upon discovering your bankruptcy may want more information concerning it.
If you have been declared insolvent then you’re not going to have to report any of this on your federal income tax return. What this means is that your debt was much higher than the fair market value of your assets.
You can also contact the IRS to ask for more information and guidance regarding your Louisville bankruptcy and how you have to declare this on your return.