Question for my dad

[mike9302]

My dad filed bankruptcy and he was discharged over a year ago. Well the IRS sent him a letter saying he owes taxes on a loan that was discharged. It was a personal loan for about 7,000 and it was a unsecured loan. Can the IRS collect taxes from a discharged loan?

I thought they would collect taxes on debts that were settled with creditors for the amount less than owed.

[justbroke]

My dad filed bankruptcy and he was discharged over a year ago. Well the IRS sent him a letter saying he owes taxes on a loan that was discharged. It was a personal loan for about 7,000 and it was a unsecured loan. Can the IRS collect taxes from a discharged loan?

I thought they would collect taxes on debts that were settled with creditors for the amount less than owed.

Taxes aren't dischargeable except under certain conditions.

Sounds like the person 1099-C'd (cancellation of debt) the debt meaning that it was forgiven. (Otherwise I don't see how you owe income taxes on a loan.)

IF this is the case, your dad may be able to declare that the taxes are not due because he was insolvent at the time.

Should refer back to his lawyer or seek a CPA to understand the 1099-C if that's what the creditor did.