Articles

Florida Bankruptcy Court Orders Creditor to Compensate Debtor

The Florida Bankruptcy Court recently came down hard on Bank of America after it ignored a Florida debtor’s discharge and continued to call the debtor thirty-eight times trying to collect on debts. The court ordered the bank to pay the debtor for emotional distress and attorney’s fees. A debtor’s discharge is a legal action intended to protect a debtor. Following a discharge, collection agencies are not allowed to send letters or make phone calls asking for payment. This gives debtors time to collect their finances without harassing phone calls and other communications. Creditors can file an objection to the debtor’s discharge. All creditors get notice of the debtor’s filing and a deadline to object. The court will not always grant a debtor’s discharge if the debtor concealed assets or has not fulfilled the necessary discharge requirements such as taking classes on personal financial management. Not all debts are dischargeable in a Florida bankruptcy petition. The most common non-dischargeable debts are those for child or spousal support or willful injuries to another person or their property. Student loan debts are also usually not dischargeable, but sometimes a knowledgeable Orlando student loan help attorney can help. Collection Agencies May Not Know of Discharge Bank of America has ignored debtor discharges in the past. The Bank will give the debtor’s information to outside collection agencies even though the debtors have a discharge. One court ruled that Bank of America took “clearly inadequate” steps in order to determine if a debtor had a discharge. Another woman spent three years working with Bank of America after they had sold her account to a collection agency. The woman...

Forgiven Debt May Be Considered Income by the IRS

As many Americans rush to file their 2011 taxes to meet the April 17th deadline, some may wonder whether they have to pay tax on forgiven mortgage debt. Many individuals who have had mortgage debt forgiven after successfully negotiating with a mortgage company may find they owe tax on the forgiven debt, though there are exceptions to the rule. Income Tax on Forgiven Debt The IRS requires individuals to pay income tax on forgiven mortgage debt. Historically, this includes any loan modifications that reduced the total amount owed on a mortgage and mortgage debt forgiven in the event of a foreclosure. The IRS provides this simplified example on its website: If a homeowner had a loan of $10,000, paid back $2,000, then defaulted on the loan, there was a cancelation of debt of $8,000 and that $8,000 is taxable income. Any amount of canceled debt over $600 must be reported to the IRS, even if it qualifies for some of the following exclusions. What Types of Forgiven or Canceled Debt is Non-Taxable Fortunately, a law passed in 2007 protects homeowners who have had mortgage debt forgiven through foreclosure. The Mortgage Forgiveness Debt Relief Act applies to most homeowners who have had debt forgiven on their principal residences. Rental or business properties are not eligible. The forgiven debt must exceed $600 but be less than $2 million and been forgiven between 2007 and 2012. Other canceled debt may also be non-taxable. Debts discharged through bankruptcy are not considered taxable income. Homeowners that can claim insolvency may also be exempt from paying tax on canceled mortgage debt. A homeowner can claim insolvency if his or her...
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