Bankruptsy erase certain types of debt? - Posted by Jim (wa)

Real Estate Investing Real Estate Law
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Posted by lukeNC on August 09, 2007 at 04:17:16:

Bankruptcy discharge means that you still owe the debt, just that your creditors cannot legally collect from you.

Now, if you wanted to offer discounts to these creditors in order to pay these debts off – that discount is considered a forgiveness of debt.

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Bankruptsy erase certain types of debt? - Posted by Jim (wa)

Posted by Jim (wa) on August 08, 2007 at 22:13:14:

If one goes through the required 5 year repayment schedule, is ones:

  1. Unpayed mortgage payments forgiven?
  2. Mortagage balance owing forgiven?
  3. Unpayed credit card payments forgiven?
  4. Pricipal credit card balance owing forgiven?
  5. Unpayed car payment forgiven?
  6. Principal car loan balance owing forgiven?

Little confused still.

Thank you,

Jim

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Forgiveness of debt - Posted by Rich-CA

Posted by Rich-CA on August 09, 2007 at 22:42:44:

Any debt that is forgiven by a creditor is taxed as income to you. It seems odd, but since you received the money as, essentially and advance, while you have to pay it back its not your money but as soon as you no longer have to pay it back, the amount drops into your column as income.

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It doesn’t work like that Jim - Posted by JT-IN

Posted by JT-IN on August 09, 2007 at 15:06:35:

The 5 yr repayment schedule is designed for a restructuring of the debt, (called a Ch 13 Bankruptcy), not forgiveness or discharge of the debt. The 5 yrs (which is max, but it can be less time), is designed to keep the creditors at bay and from using aggressive collection actions while restructuring is in progress, as long as the debtor meets the targeted Ch 13 plan.

What the Ch 13 plan will do is to have the debtor repay the back payments, at the same time remaining current on the current and future payments. It is designed for you to catch up the back payments while you pay the ones due now… there can be interest rate breaks to assist with some of this, but not a guarantee.

So there will NO forgiveness of debt involved in the 5 yr payment plan… Forgiveness of debt comes with a liquidation, which is a Ch 7. All the debts are forgiven unless you would reaffirm selective debts, like cars or houses, as long as your income supports the payments, with the other debts wiped out.

Try reading on this site for some more specifics to broaden your knowledge level on the subject. Good luck.

JT-IN