Oak Park Real Estate & Estate Planning Blog

Did you know that if you have any debt that has been forgiven or canceled, you may owe income taxes on that amount of money? In other words, you may need to pay taxes on that amount of money as if it were part of your income. However, not all forgiven or canceled debt is taxable. As such, it is critical to understand when you may owe taxes on canceled debt and when you do not need to worry about it. Our Oak Park bankruptcy attorneys will provide you with some more information and examples to help clarify situations in which eliminated debt can be taxed. When a Creditor Forgives Your Debt Outside Bankruptcy Generally speaking, if a creditor forgives or cancels any of your debt outside of bankruptcy, the amount of money that is forgiven is treated as taxable income. To be clear, if you owe money and your debt is forgiven or a portion of it is discharged outside bankruptcy, whatever amount that you do not have to pay is considered canceled debt and is typically taxable as income. As the ...

If you have had mortgage debt forgiven after a foreclosure , or through a short sale or deed in lieu of foreclosure, you could owe a significant amount of taxes on that forgiven debt. However, you should know that the Consolidated Appropriations Act of 2021 has extended the Qualified Principal Residence Indebtedness (QPRI) through 2025. What does this mean for taxpayers who have had mortgage debt forgiven? In short, for some of those taxpayers, it may be possible to exclude the forgiven mortgage debt from income for purposes of paying federal income taxes. Any taxpayers who received a 1099-C, which is a Cancellation of Debt form, from a mortgage lender, it will be important to determine whether or not the QPRI exclusion is applicable to your situation. If the QPRI exclusion does apply, you will not need to pay federal income taxes on the forgiven debt. In addition, homeowners who are anticipating that they will go through a short sale or a deed in lieu of foreclosure anytime throu...

Medical debt is a serious problem for hundreds of thousands of consumers, and it is a factor in a large percentage of personal bankruptcy filings every year. Given that more Americans are getting sick and requiring hospital care with the COVID-19 pandemic, medical debt is a bigger issue than ever before. According to a recent press release , U.S. Senator Jeff Merkley, along with members of the U.S. Senate and the U.S. House of Representatives, has introduced the Medical Debt Relief Act, which “would remove paid-off or settled medical debt from a patient’s credit report and institute a year-long waiting period before new medical debt can be reported.” The proposed legislation is designed to help debtors maintain eligibility for credit despite medical debt, and for those consumers to have a chance to catch up on medical debt before their credit is harmfully affected. We want to say more about the proposed legislation, as well as the links between medical debt and consumer bankruptcy ...