getting married and filing for inslovency this year

[getmarried]

hi there,

i'm getting married later this year, and i have two investment properties (one shared with a friend) that will go into foreclosure also this year.

i'm planning to file inslovency when i get 1099c from my banks. also, i'm planning to file tax separtely from my wife. my question is will she be liable for the cancellation of debt even though we're filing separately? i guess my real concern is that i don't want her to be responsible and liable for my debt and the tax consequences from the cancellation of my debt.

thank you,

[AngelinaCat]

Hi getmarried, welcome the forum. A couple of questions: by 'filing insolvency' do you mean you will be filing for bankruptcy? Next, what state are you in? Is your new wife going to be filing BK, if that is what you mean by 'insovency', or are you the only one?

Answers to those questions plus a little more inormation about your situation will help people to make better responses.

Thanks!

[getmarried]

Hi getmarried, welcome the forum. A couple of questions: by 'filing insolvency' do you mean you will be filing for bankruptcy? Next, what state are you in? Is your new wife going to be filing BK, if that is what you mean by 'insovency', or are you the only one?

Answers to those questions plus a little more inormation about your situation will help people to make better responses.

Thanks!

i live in CA. since my properties are invesment i can file for insolvency if my debt ratio is greater than my assets (my properties are under my name). so, according to the website below i qualified for filing insolvency. i think bk and insolvency are the same, but there are subtle differences. as for my wife to be she won't be filing for insolvency. in fact, her credit is very good and she's a high income earner. she has assets and i want to protect her assets.

http://www.ehow.com/how_4780039_file-insolvency-irs.html

when the banks send me a 1099c that is when i will file for insolvency. will her assets counted as also mine even though i file separetely? i guess i don't want her assets to be considered as mine by the irs. my wish is not to pay taxes on the debt forgiven. both of my mortgages are non-recourse. i hope that helps. thanks.

[forgotten]

Why do you think you are getting a 1099C for forgiven debt after the properties are foreclosed on? I imagine they are going to try to collect the deficiency and sue you, if needed.

[catleg]

For purposes of insolvency you have to count your IRAs and 401ks as assets. Unlike bankruptcy. Be careful.

[WaitNSee]

Slight detour...Looked up the 1099 thing on the irs website, didn't understand much of what I read. What could/would they do about civil service retirement and insolvency?

[OHBOY]

Are you going to file bk ? If so, yes, income from the non filing spouse needs to be accounted for and would be part of your bk.

I would certainly consult with an attorney....
my first gut reaction says to hold off with the wedding until the financial mess is straightened out, and until you have developed a strategy.

Hope the bride knows what's in the woodwork...

There a quite a few things to give consideration to with the obvious one being what 'catleg' already pointed out.

Filing taxes separately often does not bring benefits...of course the numbers would have to be compared.

If you are not going to file bk....I would also have an additonal question: could creditors force an involuntary bankruptcy ?...( subject to the total of your debt..) in which case your wife's income again would be taken into consideration without doubt...

Again, too much is at stake...you need to get a few consultations in with some attorneys.

[OHBOY]

Quote" WaiteNSee":
Slight detour...Looked up the 1099 thing on the irs website, didn't understand much of what I read. What could/would they do about civil service retirement and insolvency?

Here is a 'handy' worksheet: https://www.taxgirl.com/irs-releases...nsolvency-pub/

[getmarried]

i did some preliminary math and my debt from forclosing my properties would outweigh my current assets if i file separately.

oh boy, i get what you're saying. when i do file for insolvency, my wife's income and assets could potentially count also as mine. if so, i don't think i could file for insolvency...i think i will consult a tax attorney. thanks for the help.

[forgotten]

It seems like your line of thinking is:
Bank forecloses
Bank issues 1099C for deficiency
You file for insolvency to eliminate tax liability
Done.

The reality of it is:
Bank forecloses
Bank sends you a bill for deficiency
Bank sends you to collections
Bank files lawsuit - obtains judgements
Garnishes wages, levys bank accounts, and attaches liens to property

Now if somewhere in there you manage to settle with the bank (you owe $60,000 in deficency and you pay $20,000 to settle the debt), then you will be issued a 1099C for $40,000. If according to the IRS worksheet you are insolvent then you can offset the tax liability by the amount you are insolvent.

[Flamingo]

i did some preliminary math and my debt from forclosing my properties would outweigh my current assets if i file separately.

oh boy, i get what you're saying. when i do file for insolvency, my wife's income and assets could potentially count also as mine. if so, i don't think i could file for insolvency...i think i will consult a tax attorney. thanks for the help.

There has been much discussion about claiming insolvency (not the same as filing bankruptcy) and the IRS on this forum. Usually when pne considers claiming insolvency through the IRS, it raises their chances of being audited to a much higher percentage. If you do go this route, get a good tax attorney in the event you get an audit notice a few years or so down the road.