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What are there tax consequences to filing bankruptcy?

What are there tax consequences to filing bankruptcy?

: Richard West Law Office

There are seldom adverse tax consequences which result from the bankruptcy filing. In fact, just the opposite is generally the case. If you make an arrangement with a creditor to take less than the creditor is owed, as is typical debt management programs, the amount that creditor writes off is taxable income to you. So, if you owes $10,000 and a creditor agrees to take $6,000 in a settlement, you will owe tax on the $4,000 that creditor writes off. However, if you file a bankruptcy and don’t pay anything, there is no tax consequences to you.
Similarly, if you file a chapter 13 and pay $6,000 on the $10,000 debt and $4,000 is discharged in the Chapter 13 bankruptcy, you will not owe tax on the $4,000.

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