Post Bancruptcy

[Joel Santos]

What is the name of your state? Massachusetts
In 1990, I lost a house to bancruptcy, Ch. 7, I believe. The amount of investment in the house was approx. $53,000. After the bancruptcy, I was notified by the IRS that I had a $53,000 debt to pay off. If that amount was capital gains, then I should have been left with the tax on $53,000, not the entire amount. I believe the lawyer who handled the bancruptcy made a mistake. I am trying to correct this error, which has now accrued to $238,000. The premiss for this tax amount makes no sense to me. I lost all of my documentation in a fire some years ago and can't find the lawyer or firm involved. Where and how (if possible) can I get a copy of the bancruptcy transcripts? Is there any other recourse I can persue?

 

[bigun]

Have you contacted the courthouse where your bk was filed and ask if they have the records?

 

[smorr]

The Bankruptcy Court in Boston should have a record of all the paperwork filed in your bankruptcy including any creditors including the bank that held your mortgage) that may have filed any oppositions. (I just recently went through a Ch. 7 myself last year - no property involved though). The only thing I'd be concerned about is that the bankruptcy was more than ten years ago - hopefully they'll have the records still. I'm not exactly sure who to ask within the court but hopefully the prompts they give should direct you to the right department. I also would assume if your debt on the house was discharged in bankruptcy - you shouldn't owe anything on that house to the bank, the IRS or anyone else!

Good luck!

Here's the info for the court in Boston.

United States Bankruptcy Court
1101 Thomas P. O'Neill, Jr. Federal Building
10 Causeway Street
Boston, MA 02222-1074

Phone: (617) 565-8950

 

[InsulinRules]

Joel, since you lost your records you may not be able to answer these questons but give it a shot.

1) Are you sure that you paid all taxes owed for 1990 and before? The house investment being $53,000 and the tax bill being $53,000 could be coincidence. It may be that you have unpaid taxes that were not discharged in BK.

2) One thing I've seen vengeful creditors do is send a 1099C to a BK discharge (which is illegal). A corresponding copy is sent to the IRS (or maybe ONLY to the IRS) which tells the IRS that a debt was forgiven (not discharged). A forgiven debt counts as unearned income and must be included on your tax return.

3) Discharged debts ARE NOT supposed to receive a 1099C, since the debt was not forgiven.

BTW 1099Cs are also issued on partially forgiven debt. So if your creditor agrees to a settlement of 25%, you should expect to owe taxes on the remaining 75%.

JETEX posted an excellent note on this under "Debt on Tax Return" or something like that.