Tax question on charged off debt

[BKTango]

First things first, if this question doesn't belong in this section, I apologize.

I am trying to find out which answer would be the correct answer for this particular situation. I have searched the forums and other places on the internet, even called a tax service locally and still keep getting two different scenarios. Our creditors "charged off" our debt in June/July of 06. We filed CH7 in October of 06 and were recently discharged and closed.

If your OC's charged off your debt before filing BK, do you in fact owe the taxes on the debt that was then discharged in your BK, just because it was charged off before filing?

I have seen and heard now... yes you do...no you don't. I would think that if you in fact do, then ALOT of us would be paying out big time to the IRS. But I can't get a straight answer. I know that if you "settle" than yes you do usually file taxes in the forgiven amount, but the whole "charged off before bk" thing is what's confusing the heck out of me.

Just a little side not we have NOT received a 1099 or anything indicating that would need to file on this debt. I just don't know if we are supposed to (I wouldn't even know how much to claim honestly).

Does anyone know the answer to this? If so please tell me.

[Granny]

If the debt was discharged in BK, then no you should not receive a 1099 and would not owe taxes on the write off.

I can't quote the specific tax code, but that would defeat the purpose of BK.

[Minnymouth]

If the debt was included in your bankruptcy...... you pay no taxes on it......

If your debt was not included, and charged off...... you should receive a 1099 from the creditor for the forgiven debt..... then yes you would include it as income on your taxes.......

Hope that helps.......

[BKTango]

Thank you both for the replies. I had assumed that was the case, but seeing and being told otherwise had me at a loss. I can breathe now lol.

[poorme]

We're seeing a lot of 1099-C showing up from discharged mortgages. I was told the mortgage companies have to file those in order to get their tax write-off on discharged debts. So, although you don't owe anything, you may still have to show uncle sam your discharge so they can adjust your earnings.