Create a new account

It's simple, and free.

Tax Consequenes of Bankruptcy Filing Taxation Consequences of Individual Bankruptcy F

Taxation Consequences of Individual Bankruptcy Filing

This paper will discuss the tax consequences of a bankruptcy filing by a non-corporate individual. Most of the discussion will focus upon the status of the discharge of indebtedness, which is the object of a bankruptcy filing, and the tax liability of the bankruptcy estate.

Under the Bankruptcy Code, there are two different types of bankruptcy filings: liquidation and reorganization. In a liquidation bankruptcy (Chapter 7) all of the property owned by the debtor at the date of bankruptcy is placed in the bankruptcy estate, which is a separate entity from the debtor, administered by a court-appointed trustee. As will be explained later, the estate is taxed as a separate entity from the debtor. This property, placed in the estate, is then used to satisfy the debts of the debtor and the expenses of the bankruptcy proceedings. In a reorganization bankruptcy (Chapters 11 & 13) the debtors property is again placed in the bankruptcy estate, but the debtor also files a plan, approved of by his creditors and confirmed by the bankruptcy court, under which the debtor proposes to pay, in whole or in part, the debts he owes over a period of time. The creditors are guaranteed payment of no less than the amount which they would have received under a Chapter 7 liquidation. Because the debtor pays the creditors from future earnings, he or she generally remains in possession of the property in the estate; as will be explained later, the estate in a Chapter 13 reorganization is not a separate entity for tax purposes.

The main difference between a Chapter 11 reorganization and a Chapter 13 reorganization is that Chapter 13 is intended for use by individuals who are not corporations who have future earning potential. These persons would be unnecessarily harmed by a Chapter 7 liquidation, which often would result in the loss of the family home; on the other hand, a Chapter 11 reorganization woul...

Page 1 of 11 Next >

More on Tax Consequenes of Bankruptcy Filing Taxation Consequences of Individual Bankruptcy F...

Loading...
APA     MLA     Chicago
Tax Consequenes of Bankruptcy Filing Taxation Consequences of Individual Bankruptcy F. (1969, December 31). In LotsofEssays.com. Retrieved 11:48, March 28, 2024, from https://www.lotsofessays.com/viewpaper/1700291.html