The Tax Consequences of Foreclosure are Complex Says Iowa Bankruptcy Lawyer | Law Firm Newswire

The Tax Consequences of Foreclosure are Complex Says Iowa Bankruptcy Lawyer

Des Moines, IA (Law Firm Newswire) August 31, 2011 – Surrendering a home triggers some really difficult tax issues. Speak to an experienced Iowa bankruptcy lawyer to fully understand this issue.

“When you surrender a home, banks are mandated to hand the IRS something called a 1099-C, or cancellation of debt, which details any deficiency that is owed over and above what is eventually received for the house,” explained Iowa bankruptcy lawyer Kevin Ahrenholz. “This means that the IRS typically regards ‘not’ having to pay the loan money, in whole or part, as income. If you have been forgiven the deficiency amount, this is looked at as being income, which means you can’t declare it as an expended loss. Kind of tricky isn’t it? You need to discuss these matters with a bankruptcy lawyer, or end up on the wrong side of the IRS.”

Enter the Mortgage Forgiveness Debt Relief Act of 2007. “There are exemptions that are ‘not’ considered to be income,” outlined Ahrenholz. “For example, qualified principal residence indebtedness (for most owners), bankruptcy (discharged debts not taxable income), insolvency (when total debts are more than fair market value of assets), some farm debts, and non-recourse loans can qualify.”

Bankruptcy is a complex process and it is best to consult with a skilled Iowa bankruptcy lawyer to get help to on the numerous forms, rules and regulations. “Speaking of forms, for those facing foreclosure and have debt cancellation, there are two forms you need,” said Ahrenholz. “The IRS publication 4681 outlines the debt cancellation process and the exceptions, and the IRS form 982 lays out the qualified amounts that are forgiven.” Form 982 needs to be filled out and sent in with a debtor’s tax return.

In many instances, people file for bankruptcy as a result of foreclosure and want to protect their home by filing for bankruptcy, as once they file an automatic stay kicks in. This is applicable to all types of bankruptcy filings, including those due to lawsuits, evictions, repos, garnishments, attachments, utility shut-offs and credit collections harassment.

“Bankruptcy is a tough journey and we’re here to help you get through the process,” added Ahrenholz. “If you want to ask questions about which Chapter would best suit your particular circumstances, just give my office a call. We deal with bankruptcy petitions every day. We understand how you feel.”

To contact an Iowa bankruptcy attorney, Iowa Chapter 7 bankruptcy attorney, or set up an appointment visit or call 1.877.888.1766.

Kevin Ahrenholz
309 Court Ave., Suite 805
Des Moines, IA 50309
Offices in Des Moines, Cedar Rapids, Waterloo, Mason City, and Vinton.

  • New Small Business Reorganization Act
    <p>A new subchapter has been added to the bankruptcy code making it easier for small businesses with debt of less than $2,725,625 to seek protection under Chapter 11 of the bankruptcy code.  Previously a Chapter 11 requires so much detailed reporting and documentation that it has been impractical for a small business to file a Chapter 11.  The burdens and costs in doing so were too high, and Chapter 11 bankruptcies were reserved mainly for larger businesses that had sufficient cash flow to justify the time and expense involved.  The new provisions provide some new protections for small businesses that […]</p>
    The post <a href="">New Small Business Reorganization Act</a> first appeared on <a href="">Iowa Bankruptcy Attorney</a>.
  • Stop foreclosure with Chapter 13
    <p>Are you facing the foreclosure of your home?  Has your mortgage company stopped working with you or accepting your payments? A Chapter 13 bankruptcy can be the solution.  If you can afford your monthly mortgage payments, but simply cannot catch up on arrears, a three-year to a five-year Chapter 13 plan could be the solution to helping you catch up, giving you time to become current, and delaying the sheriff sale for the time it takes you to become current.  If you successfully complete the Chapter 13 plan, you will come out on the other side completely caught up on […]</p>
    The post <a href="">Stop foreclosure with Chapter 13</a> first appeared on <a href="">Iowa Bankruptcy Attorney</a>.
  • Bankruptcy and Medical Debt
    <p>People often call me and ask whether there is something called a “medical bankruptcy.” Although that term does not exist in the bankruptcy code, there is something that helps people eliminate and manage their medical debt. It is called a Chapter 7 bankruptcy. Medical debt can be discharged, or eliminated, through a Chapter 7 bankruptcy proceeding, which typically takes about four months to complete through the bankruptcy court. A Chapter 13 bankruptcy can also help manage medical debt, although it generally takes three to five years to successfully complete a Chapter 13 bankruptcy plan. It is much like a court-ordered […]</p>
    The post <a href="">Bankruptcy and Medical Debt</a> first appeared on <a href="">Iowa Bankruptcy Attorney</a>.

Tags: , , , , ,

Get headlines from Law Firm Newswire sent right to your inbox.

* indicates required