Discharged Debt and Tax Liability
Approaching tax season each year, we get a common question about bankruptcy and tax liability for discharged debt. The short answer is this: if you cut a deal with a creditor to “charge off” a portion of your debt, the charged-off portion is taxable and subject to a 1099-C filing with the IRS. On the other hand, an advantage of a Bankruptcy filing is that discharged debt is typically not taxable as income. Please call our office at if you have any questions.