Do I have to pay taxes on any discharged debt?

In Indiana, any outstanding debt that has been discharged through bankruptcy may not be taxed. This includes discharged debt from both Chapter 7 and Chapter 13 bankruptcies. When a debt is discharged in bankruptcy, it means that the debtor is not legally obligated to pay the debt. In other words, the bankruptcy discharge frees the debtor from any future liability on the debt. In some cases, a debtor may feel as though they must pay a discharged debt, but this is not required. Even though the debt has been wiped away, the creditor may still report the debt to the credit bureaus. This is why it is important to dispute any such report. In order to determine whether taxes are due on discharged debt, it is important to consult with a qualified tax professional. Generally, taxpayers can exclude canceled debt from income as long as certain conditions are met. These conditions include but are not limited to the discharge of indebtedness being made after December 31, 2018, the debt being qualified principal residence debt, and the debtor not being insolvent at the time of the discharge. If it is unclear as to whether or not taxes are due on discharged debt, it is important to consult with a qualified tax professional to obtain more information.

Related FAQs

What is the difference between a joint bankruptcy filing and an individual filing?
Are there additional filing fees associated with filing for bankruptcy?
How often can I file for bankruptcy?
What are the differences between filing for Chapter 7 and Chapter 13 bankruptcy?
How will filing for bankruptcy affect my credit score?
Are there any assets that I will not be able to keep in bankruptcy?
What types of debt can be discharged through bankruptcy?
Are there any debts that cannot be discharged in bankruptcy?
How much does it cost to file for bankruptcy?
What type of information will I need to provide to my attorney before filing for bankruptcy?

Do I have to pay taxes on any discharged debt?

Related FAQs

Related Blog Posts