Oak Park Real Estate & Estate Planning Blog

You may not know this, but most debts that are “forgiven,” or discharged, have tax implications. In other words, the forgiven debt looks like taxable income when it comes time to file your taxes. Does debt forgiven in Chapter 7 bankruptcy or Chapter 13 bankruptcy work the same way? In other words, do you have to pay taxes on the debt that has been discharged? In short, the answer for debt discharged through bankruptcy is no—this forgiven debt is not considered taxable income by the IRS under federal law ( 26 U.S. Code Section 108 ). However, it is important to understand how this process works and to have a clear idea of when you will be responsible for taxes on debt that has been forgiven by a creditor. Discharged Bankruptcy Debts Do Not Count as Income for the Purposes of Your Taxes After you file for bankruptcy and receive a discharge of your debts, you might be wondering whether the forgiven debt counts as income when it is time to file your taxes in April. I...

If you recently received a disability settlement, it is possible that a company has contacted you with an offer to give you a structured settlement in exchange for selling some of your disability payments. As an article from the Federal Trade Commission (FTC) explains, this practice is known as “factoring,” and it can have harmful consequences for struggling debtors . What do you need to know about “factoring” and the ways it could impact your ability to pay your bills in the long run? Why might a debtor choose this route instead of filing for personal bankruptcy ? What is “Factoring” and How Does it Work? In general, “factoring” means that you will “sign over some or all of your disability settlement payments for a period of time.” The lump-sum payment that the company will give you in exchange for your disability payments typically is going to be less in the long run than the total of the disability payments. Why would anyone do this? Factoring gives struggling de...

Do you owe back taxes to the Internal Revenue Service (IRS) or to the state of Illinois? If you do, you may have received calls, emails, or pieces of snail mail from tax relief companies offering to help you pay your bills. However, it is important for Oak Park residents to know that many tax relief companies often engage in consumer fraud , and sometimes they can even scam debtors who are in need of serious debt relief . As an article from the Federal Trade Commission (FTC) explains, “if you pay them an upfront fee, which can be thousands of dollars, these companies claim they can reduce or even eliminate your tax debts and stop back-tax collection by applying for legitimate IRS hardship programs.” However, most individuals who owe tax debt simply do not qualify for these programs. Even if you do qualify for an IRS hardship program, tax relief companies often promise to settle debts when they lack the ability to do so, and many of these companies fail to ever send qualify...

When debtors in Oak Park are thinking about filing for bankruptcy , they are most often considering either Chapter 7 bankruptcy or Chapter 13 bankruptcy. You may know that, in order to be eligible for Chapter 7 bankruptcy , you must pass what is known as a “means test.” The means test takes a look at your assets and income, along with other factors, to determine whether a liquidation bankruptcy is appropriate for your situation. Chapter 7 bankruptcy, unlike Chapter 13 bankruptcy, results in a discharge of most consumer debts once the bankruptcy has been completed. Typically, when a consumer cannot pass the means test, he or she will rely on Chapter 13 bankruptcy to help get back on track with debts and finances. However, many consumers do not know that there are also eligibility requirements for Chapter 13 bankruptcy. What happens if you have too much debt to file for Chapter 13 bankruptcy protection? Determining Eligibility for Chapter 13 Bankruptcy in Oak Park If...

Starting on July 1st, consumers in Oak Park, Illinois and throughout the country may have started seeing changes to their credit scores despite making no changes to their personal finances. According to a recent article in MarketWatch , a new policy that took effect at the beginning of this month will result in around 12 million consumers seeing an uptick in their credit scores from all three nationwide consumer credit reporting agencies. In particular, having a record of consumer bankruptcy on your credit report may, in certain cases, have less of an impact on your credit score. What else do you need to know about the ways in which Equifax, Experian, and Transunion will be reporting credit scores from this point forward? Consumer Credit Reporting Agencies Will be Gathering More Specific Information As the article explains, Equifax, Experian, and Transunion, as of July 1st, “will begin collecting more specific information about the public records that are included on ...