This blog entry will dispel common myths and educate you on the general process of bankruptcy in Florida.
QUESTION: Is there a tax advantage to filing bankruptcy?
We meet with many prospective clients who are trying to determine the best way to reduce or eliminate debt. Often these prospective clients have talked to or considered working with a debt consolidation company. One of the main reasons why bankruptcy is often a more favorable option that seeking “workouts” or debt consolidation is that a discharge of debt is not a taxable. In contrast if you “settle” or “workout” your debts with your creditors for fifty cents on the dollar, then the creditor will issue you a 1099-C which deems the fifty percent debt cancellation is added to your taxable income. In essence, you are still paying back that debt.
Additionally, bankruptcy provides a way to discharge or reduce certain past due income taxes as well as allowing an opportunity to pay outstanding tax liability without penalties and interest up to a five year repayment plan (if a Chapter 13 Bankruptcy is filed).
For more information, please contact the experienced bankruptcy attorneys at The Wallace Law Group with convenient office locations in Boynton Beach, Fort Lauderdale, Aventura and Downtown Miami.