Is the debt discharged by a Chapter 7 considered income to the debtor for income tax purposes?

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Is the debt discharged by a Chapter 7 considered income to the debtor for income tax purposes?

Asked on April 15, 2014 under Bankruptcy Law, Wisconsin

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 9 years ago | Contributor

Yes, it is. Any debt discharge or foregiveness is considered income for income tax purposes, since both mathematically and in the eyes of the law, not having to pay $1,000 is the same thing as being paid $1,000. You may wish to speak with a tax professional to discuss how best to deal with any tax liability.


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