Riverside Debt Cancellation Attorney

Understand the Tax Consequences of Debt Cancellation

Under Section 108 of the Internal Revenue Code, any debt cancellation is considered income. However, there are two circumstances where debt cancellation is not considered income. The law firm of Winfield Payne & Associates can prove that you qualify under the circumstances and mitigate the tax consequences of your bankruptcy.

Please contact attorney Winfield Payne today to arrange a free consultation to discuss debt cancellation. Since 1979, Mr. Payne has provided hands-on legal representation by personally preparing and filing all bankruptcy documents.

Minimizing the Tax Consequences of Debt Cancellation

Under Section 108, the following are the two circumstances where debt cancellation is not considered income and therefore not taxed:

• If you were insolvent when the debt cancellation occurred, it is not considered income. In other words, if your liabilities exceeded your assets, you will not be taxed on the debt cancellation.
• If the debt cancellation occurred in Title 11, you will not be taxed on the debt cancellation. Title 11 is any chapter of the Bankruptcy Code. Attorney Winfield Payne has extensive knowledge about chapter selection and can strategize to suit your goals.

The Mortgage Forgiveness Debt Relief and Debt Cancellation Act of 2007

The Mortgage Forgiveness Debt Relief and Debt Cancellation Act of 2007 was effective from 2007 through 2009. If you cancelled a debt on a residence that was your primary residence for two of the last five years, and if that cancellation was less than two million dollars, the debt cancellation is not considered income. This can apply to homeowners who avoided foreclosure on their homes through short sales or mortgage modifications.

These rules apply for primary residences; not rental property.

Talk to an experienced lawyer today regarding your questions about the tax consequences of debt cancellation. Contact us today to schedule your consultation.