top Ad Widget

Collapse

Announcement

Collapse
No announcement yet.

Taxes and walking away...

Collapse
X
Collapse
 
  • Page of 1
  • Filter
  • Time
  • Show
Clear All
new posts
Previous template Next
    #1

    Taxes and walking away...

    We owe 447K and are walking. It could probably sell for 250K,if that matters. What will happen to us tax wise when we walk? We are in CA and do not have a second, but a few years back we did re-fi and took out 40K since we had equity way back then.

    Just wondering if I am looking at a big tax problem, or if the reduction acts help with this problem.
    Teacher Momma
    Tags: None
    #2
    Will be dismissing soon Have no idea what's next.
    Why don't one of you take some time off from work and get your income down into Chapter 7 territory and file for 7? As much of a hardship as that would be, it would still be less than having your wages garnished for ever more.
    Pay no attention to anything I post. I graduated last in my class from a fly-by-night law school that no longer exists; I never studied or went to class; and I only post on internet forums when I'm too drunk to crawl away from the computer.

    Comment

      #3
      The cash you took out in the refi may be taxable, but the amount used to cover the original principal balance should be exempt. However, if you discharge this in bankruptcy or are considered insolvent you could avoid the tax issue.

      Comment

        #4
        We each make over the median income, so I don't know how that would work. I guess with the expenses that we have, the UST says we are over my 2400, so if one of us quit that would do it....but we both have public sector jobs that are being cut so if I were to quit, I would more than likely not be able to "hop" back in after I was ready to go back. Same with my husband....and neither of us can reduce our hours either, it is all or nothing. This was actually suggested by the UST - but we are both contracted public employees who's job will not be there when we get back......

        Also, if I/he did quit - we would lose the 1500 childcare costs/expenses we have since the kids would not be in/not need the childcare....so then we are back to having expense problems.

        Since we are in CA - community property state - can my husbands income be garnished for MY debt. Most of it is premarital.
        Teacher Momma

        Comment

          #5
          Originally posted by hereforinfo View Post
          The cash you took out in the refi may be taxable, but the amount used to cover the original principal balance should be exempt. However, if you discharge this in bankruptcy or are considered insolvent you could avoid the tax issue.
          Our BK was dismissed, so not covered in the BK. How would I figure out if we are insolvent?
          Teacher Momma

          Comment

            #6
            If your debts total more than your assets, you are insolvent and may be exempt from being taxed on forgiven debt. It just requires filling out a form or two and submit them with your taxes. Here are a couple of links with good info:

            How to Prove Insolvency With the IRS
            http://www.ehow.com/how_4780039_file-insolvency-irs.html
            When someone cancels a debt you owe, the IRS takes the position that it's income. Although you didn't receive any money, you no longer owe the debt, and it's the same as if they gave the money to you. You can avoid paying taxes on canceled debt if you can prove that you’re insolvent.


            Tax Consequences of Settling Debt
            http://www.nolo.com/legal-encyclopedia/article-29792.html
            Learn the tax implications of debt settlement.

            Comment

            Previous template Next

            bottom Ad Widget

            Collapse
            Working...
            X