… According to the IRS, not necessarily.
Could my Canceled Debt be Taxable?
Yes. Typically, loan proceeds are not income because there is an obligation to repay. According to the IRS, when a lender forgives a debt it is considered income.
What Count as Income Anyway?
The IRS is concerned with gross income (i.e. “all income from whatever source derived”). If it is not debt canceled by bankruptcy or other qualified indebtedness, certain qualified student loans, a gift, or a bequest, it is income.
What About Income from my Canceled Mortgage Debt?
Income from mortgage debt cancellation is usually taxable. However, the Mortgage Forgiveness Debt Relief Act of 2007 allows the exclusion of mortgage modification income. But only between the years 2007 through 2012.
What About Credit Card Debt Forgiveness?
In some cases, non-business credit card debt cancellation may be excluded from taxable income, but only if the cancellation is a result of bankruptcy or insolvency.
Where Can I Learn More About Canceled Debt Counting as Income?
The IRS has prepared an FAQ Page and Publication 4681 “Canceled Debts, Foreclosures, Repossessions, and Abandonments.”
Source(s): IRS, U.S. Code, CreditCards.com, and Small Biz Accounting Specialist.
Categories: IRS · Q&A · bankruptcy · credit card · credit cards · debt · income · mortgage
In re Tekena USA, LLC, 09-16969
Issued: November 19, 2009
Judge: Jacqueline P. Cox
Summary: The Court grants Creditor’s Motion to Dismiss. The Court agrees with Movant’s allegations that Debtor’s petition violated § 1112 (b) of the Bankruptcy Code’s “Good Faith” requirement for Chapter 11. Movant has proven by a preponderance of the evidence that dismissal is justified.
View and download the opinion in PDF format here.
Categories: 1112(b) · bad faith · bankruptcy · ch 11 · cox · dismissal
What is the “Home Affordable Modification Program”?
The “Home Affordable Modification Program” or HAMP is a federal program part of the Obama administration’s stimulus package that seeks to incentivize mortgage providers to reduce mortgage loans down to a monthly payment that borrowers can reasonably afford.
Will my monthly mortgage payment actually be reduced?
If your current mortgage bill is more than 31% of your monthly income, under HAMP mortgage providers are required to reduce the monthly payments to 31% of gross monthly income without going under.
Do I qualify?
There are several requirements for qualification:
- Only first mortgages, which must have originated prior to January 1, 2009, apply
- The loan must either be delinquent or reasonably expected to default.
- The borrower must have suffered hardship (increase in expenses and/or decrease in income).
- The mortgage must be for the borrower’s primary residence.
- The mortgage amount for a one-unit residence must not exceed $729,750.
- The borrower must consent to an escrow on real estate taxes and insurance.
What about second mortgages?
When the first mortgage is modified, a second mortgage will also be reviewed if it exists. The interest rate on your second mortgage will be reduced down to 1% for the first five years. Additionally, the term of the second mortgage will be increased to match the term of the first mortgage.
Where can I learn more?
You can visit http://hmpadmin.com for press releases and announcements or download the requisite forms here.
Source: Chicago Consumer Bankruptcy Conference Educational Materials and the Home Affordable Modification Program website.
Categories: Q&A · ch 13 · default · mortgage · obama · real property · stimulus package
Tagged: stimulas package
In re Timothy Stirneman, 09 B 20315
Timothy Stirneman v. Audrey Stirneman, 09 A 00556
Issued November 4, 2009
Judge Jack B. Schmetterer
Summary: In the case at hand, Parties entered a Term Sheet Agreement with regards to shared office space; each was to pay 50% of certain shared expenses. Defendant had not fulfilled her part of the agreement. Since the parties were intended to be personally liable, the Court has found Defendant personally liable for the unpaid shared expenses. Furthermore, Plaintiff is entitled to relief against Defendant’s transfer of funds for new personal office equipment because Defendant acted so as to defraud Plaintiff. The Court therefore has decided that a preliminary injunction against Defendant is warranted.
View and download the opinion in PDF format here.
Categories: ED · IL · ND · adversary · bankruptcy · ch 13 · ch 7 · cir 7 · consumer · current-events · individual · opinion · schmetterer
In re Dorsie Wayne Mosher, Jr., 06 B 71261
William T. Neary, US Trustee, v. Mosher, 07 A 96013
Issued: November 4, 2009
By Judge: Manuel Barbosa
Summary: The Court ruled in favor of the U.S. Trustee by denying the Debtor’s petition to discharge. Under 11 U.S.C. § 727(a)(2), the Court must grant discharge to the debtor unless the debtor intentionally hindered, delayed, or defrauded a creditor or Trustee. Debtor knowingly failed to list his income and admitted to making a conscious decision to list only certain debts in his petition. The Court finds that the Debtor “knowingly and fraudulently made false oaths” and thus should be denied a discharge under Section 727(a)(4)(A).
View and download the opinion in PDF format here.
In re Jody R. Deutscher and Kelly C. Deutscher, 08 B 73603
Issued: October 28, 2009
By Judge: Manuel Barbosa
Summary: The Court granted U.S. Trustee’s motion to dismiss. Under 11 U.S.C. § 707(b)(1), the Court may dismiss a case in which the debts are primarily consumer debts, if the granting of relief is tantamount to abuse of the provisions of Chapter 7. The Debtors fall under two applicable provisions: 1. Debtors purchased luxuries on credit on the eve of bankruptcy 2. Debtors’ budget is “excessive or unreasonable.” As the Court found, The Debtors want to continue a lifestyle of luxury, purchasing a yacht and boat, “even after seeking a bankruptcy discharge by reaffirming their debt on these luxury items rather than […] do some belt tightening.”
View and download the opinion in PDF format here.
In re Joseph M. Phelan and Mary M. Phelan, 09 B 70398
Issued: October 28, 2009
By Judge: Manuel Barbosa
Summary: Under the Fifth Amendment’s Due Process clause, creditors have the right to “reasonable notice” when being listed as a creditor in bankruptcy petitions. Creditor Employee Benefits Security Administration (ESBA) did not learn of Debtor’s intent to file for bankruptcy until at east two months after the date required by Fed. R. Bank. P. 4007(c). Furthermore, Debtors failed to list EBSA on their bankruptcy petition. Therefore the Court has granted the Secretary of Labor leave to file an adversary complaint for determination of dischargeability.
View and download the opinion in PDF format here.
Categories: 707 · 727 · IL · ND · UST · WD · adversary · bankruptcy · barbosa · ch 13 · ch 7 · chapter 7 · cir 7 · consumer · current-events · discharge · dismissal · individual
