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Old 02-02-2013, 10:18 AM
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1099-c student loan debt/bankruptcy

My husband is disabled and has $15,000 in student loan debt. We applied to have this amount forgiven and he was granted forgiveness on this loan in Nov 2012. We received a 1099-C for this amount, which I know needs to to be reported on our taxes. I know there is a bankruptcy exception. We filed chapter 13 in June 2009 and the debts were discharged in June 2012. The student loan debt was included in the bankruptcy paperwork, but was discharged only after we applied for forgiveness throught the dept of education. Does this count as the bankruptcy exception? i am worried that this extra amount on our taxes will show our income much higher than it actually is. We have twin 10 yr old sons who are disabled and receive SSI. They also go to therapy, which is on a sliding scale depending on income, 4 times per week. Will the 1099-C income count toward income as far as SSI is considered? Thank you for any help or advice you can give me (*very worried)



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Old 02-02-2013, 07:29 PM
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“We received a 1099-C for this amount, which I know needs to to be reported on our taxes. I know there is a bankruptcy exception. We filed chapter 13 in June 2009 and the debts were discharged in June 2012. The student loan debt was included in the bankruptcy paperwork, but was discharged only after we applied for forgiveness throught the dept of education. Does this count as the bankruptcy exception? “===========>. If your loans are discharged, they will be assigned to the U.S. Department of Education before your debt is permanently cancelled. To cancel or discharge your loan, you need to first find out who is currently holding your loan. Check the collection notices that you have been receiving. Additionally you may call the Federal Student Aid Information Center at 1-800-433-3243 (1-800-04-FED-AID). If the guarantor agency has the loan you should deal with it. If the Department of Education is holding the loan, deal directly with the Department. If the Department has referred your loan to a collection agency, inform the agency in writing that you are contesting the debt by filing for a discharge of the Department of Education. If you defaulted on a Perkins Loan, it may still be held by your college and you should contact it for more information If you qualify for a complete discharge of your loan, you are no longer obligated to make loan payments. Depending on the type of loan discharge program for which you may be eligible, the U.S. Department of Education may be required to refund to you some or all of the payments you made on the loan. In addition, any adverse credit record related to a default might be deleted, and no tax refund offset or wage garnishment will take place to collect on the discharged loan.



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Old 02-03-2013, 07:43 PM
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Thank you for your reply. The dept of Education has our loan. We are not required to make any payments. The loan will be discharged after a 3 yr waiting period, which will be over in Nov 2015. They sent us a form 1099-c, which baiscally means we have to claim the $15,000 as income on our taxes. In addition to owing a lot of money on our State and Federal taxes, I am worried that other programs that use our taxes will charge us more than we can afford. One program is our childrens autism therapy program, which requires payment based on a sliding scale. My sons also receive social security disability. I am worreid that they will lose these payments, since 'on paper' it will look like we have more money than we actually do. There is an exception rule for the 1099-c. One of the exceptions is that if it was discharged in a bankruptcy, we don't have to claim it as income on our income taxes. The dibt was included in our bankruptcy, but was not discharged in the bankruptcy. It was discharged after applying for forgiveness and sending in documentation from my husband's doctor.



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Old 02-03-2013, 08:52 PM
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“The loan will be discharged after a 3 yr waiting period, which will be over in Nov 2015. They sent us a form 1099-c, which baiscally means we have to claim the $15,000 as income on our taxes. In addition to owing a lot of money on our State and Federal taxes, I am worried that other programs that use our taxes will charge us more than we can afford. “==>Each individual state has their own requirements when it comes to the treatment of a student loan. For instance, the State of Pennsylvania does not require you to pay income taxes on a discharged student loan or any other loan as they do not consider loan forgiveness as personal income. For what your individual state requires of a discharged student loan, you will need to go to your local state's website and search "student loan discharge."
“One program is our childrens autism therapy program, which requires payment based on a sliding scale. My sons also receive social security disability. I am worreid that they will lose these payments, since 'on paper' it will look like we have more money than we actually do.”==> The government has powerful tools to use against borrowers who don't make student loan payments. The IRS can intercept any income tax refund you may be entitled to until your student loans are paid in full. This is one of the most popular methods of collecting on defaulted loans, and the Department of Education annually collects hundreds of millions of dollars this way. In some cases, you can challenge a tax refund offset; The government can take ("garnish") a limited portion of the wages of a student loan debtor who is in default. It can take up to 15% of your disposable income. However, it cannot take more than the equivalent of 30 times the current federal minimum wage. As with the tax refund offset, you can object to a wage garnishment; The government can take some federal benefit payments (including Social Security retirement benefits and Social Security disability benefits, but not Supplemental Security Income) as reimbursement for student loans.The government cannot take any amount that would leave you with benefits less than $9k per year or $750 per month. And, it cannot take more than 15% of your total benefit.For example, ifyiu receive monthly federal benefits in the amount of $900, the government may take either $150 (the amount of your $900 benefit that is over $750) or $135 (15% of yourtotal benefit of $900), whichever is less. So, in this case, the government can take only $135 each month; The government and private lenders can sue you to collect defaulted student loans. Unlike other debts, there is no time limit on suing to collect student loans -- you can be sued indefinitely.
“There is an exception rule for the 1099-c. One of the exceptions is that if it was discharged in a bankruptcy, we don't have to claim it as income on our income taxes.”===>It depends. Student loans are usually non-dischargeable in bankruptcy. This means that after your bankruptcy erases all your other debts, you still have to pay student loan debt. If you fall nine months behind, your lender can call the whole loan due at once. Filing bankruptcy can be an option in only one circumstance.The law lets you eliminate your student loans if paying them creates an "undue hardship" for you and your family. You must prove to the bankruptcy court that you're only earning enough to pay for a "minimal standard of living." This usually means you can’t afford cable, Internet or a cell phone - even without paying your student loans. You also have to prove that your finances aren't likely to get better. It helps if you were able to make at least a few payments. This shows the court that you tried. With the Federal tax code the way it is, there is always some confusion as to whether or not you may have to pay income taxes on a discharged student loan.
“ The dibt was included in our bankruptcy, but was not discharged in the bankruptcy.”===>Correct as said above.
“ It was discharged after applying for forgiveness and sending in documentation from my husband's doctor.”====> (for cases filed PRIOR TO October 17, 2005, if the PROGRAM under which your student loan is issued, insured, administered is a FOR-profit, PRIVATE (non-government) entity, it may be dischargeable. However, if the program itself, such as LAL, GSL, etc. receives nonprofit funding by participation of nonprofit entities, the loan is not dischargeable in bankruptcy. There are other ways to deal with student loans. For example, student loans can be eliminated for several specific causes, such as death, being permanently disabled, or closing of the school you attended before getting your degree.



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Old 02-03-2013, 09:55 PM
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Thank you! You have been very helpful......



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Old 05-29-2013, 06:16 AM
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If you can demonstrate that you qualify for an exclusion or exception, you may be able to avoid paying taxes on part or all of that phantom income. One of the most commonly used exclusions is the “insolvency exclusion.” You can contact The Law Offices of Allen A. Kolber, Esq. for your bankruptcy solution. There expert lawyer will give you best solution on 1099-C for Debt Settlement. You can contact them from 134 Route 59 Suite A or call 845-918-1277.



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