RECEIVING A 1099-C AFTER BANKRUPTCY
Feb. 28, 2020
No matter what life circumstances led you to the decision to file for bankruptcy, Garcia & Gonzales, P.C. understands it was a difficult choice. Practicing since 1977, our lawyers have successfully handled thousands of bankruptcy cases and expertly guided our clients through the process of recovery in the wake of financial challenges.
At Garcia & Gonzales, P.C., we pride ourselves on our ability to provide compassionate, honest, and thoughtful answers to our clients as they navigate their bankruptcy recovery process. Because no bankruptcy recovery process is the same, our partners will work with you directly to provide the highest quality legal assistance available in the Westminster, Co area.
With the help of Garcia & Gonzales, P.C., we will set on you the right path to meaningful recuperation from your financial hardships and work with you to move forward with the best tools for achieving a fresh start.
Why was I sent a 1099-C after my bankruptcy discharge?
If you filed for bankruptcy and later received an unexpected 1099-C notice, it could have happened for several reasons. First, it’s essential to understand the purpose of a 1099-C document. A 1099-C is created by a financial institution, such as a bank or a private lender, after a qualifying event occurs.
Bankruptcy is one of these qualifying events. When a qualifying event occurs, an existing debt exceeding a sum of $600 has been canceled and is no longer required to be paid. That might sound great—and it’s likely why you filed for bankruptcy in the first place—but in some cases, there are some unexpected income implications.
Once you’ve received a 1099-C after your bankruptcy discharge, it is imperative that you file the proper forms, including your 1099-C, so that the IRS does not hold you liable for including the 1099-C amount as part of your 1040 income tax filing.
With the help of our dedicated team of bankruptcy attorneys at Garcia & Gonzales, P.C., we will establish the best course of action, including filing all the proper paperwork after your bankruptcy discharge, for moving forward from your bankruptcy.
Excluding 1099-C Canceled Debt from Income after Bankruptcy
Without the proper knowledge of how to handle bankruptcy, you could be held liable for claiming canceled debt as part of your income. At Garcia & Gonzales, P.C., we know that this debt does not equate to more money in your pocket.
With our proven expertise in bankruptcy filing and recovery, we will guide you through filing the proper paperwork to ensure the best outcome in the wake of your bankruptcy. After you receive your 1099-C, it’s vital that you file your 1040 tax return and include the necessary Form 982 to have your canceled debt excluded from your income.
Common 1099 Issues with Secured Property After Your Bankruptcy Filing
Any property you are currently making payments on is considered secured property. Secured property commonly includes big-ticket items such as your car or your home. When you purchased your car or home, you likely agreed to finance the remaining sum left on the property after you made your initial down payment. After you agreed to these financing terms, you also agreed to pay interest on your loan.
In cases of bankruptcy, secured property is often collected as a means to pay back some of the remaining balance on your loans. This may mean your car was repossessed or your home was foreclosed on by the bank. While these collections are often life-shattering and destabilizing, the IRS does not take that into account automatically.
If your home, car, or other secured property has been repossessed during or after your bankruptcy filing, the IRS will proceed as if you sold your home outright. After your home is deemed sold by the IRS, they will want to know if your asset appreciated or depreciated.
In cases of appreciation—this means your home, car, or other secured property was “sold” for more than the original purchase value—the IRS will consider this taxable gain. If the IRS deems you to have benefited from a taxable gain, this may result in increased taxes.
To avoid this unfortunate outcome and best navigate the confusing ins and outs of 1099 issues with security property, it’s beneficial to retain legal representation that can advise you on how to proceed effectively.
At Garcia and Gonzales, P.C., we will use our decades of legal resources to walk you through IRS Publication 533 and Publication 523 so that you are armed with the best information available to move forward from your bankruptcy. We aim to get you favorable results and the best shot at a fresh start.
Call Us Today
If you have filed for bankruptcy and you are struggling with understanding the complicated nuances of bankruptcy law and its IRS implications, call us for help. Our experienced team of Westminster bankruptcy attorneys at Garcia & Gonzales, P.C. will use every resource available to us to resolve your debt issues as quickly and as painlessly as possible.
This may be your first time dealing with this tedious process, but it is not ours. We will treat you with the utmost understanding and respect while providing you with honest answers and strategies for moving ahead with your case and unique financial issues.
Call us today so that we can review your case.