Post-Bankruptcy Frequently Asked Questions
My case has closed, but a creditor is still trying to collect the debt. What do I do?
You should have received a document entitled Discharge of Debt from the U.S. Bankruptcy Court and your attorney. Simply provide the creditor a copy of this discharge to prove that the debt was discharged in bankruptcy. Remember that bankruptcy only discharges debt that existed on the date that the case was filed. If this debt arose after the date your case was filed with the court, then it was not discharged in your bankruptcy.
I received a 1099-C for Cancellation of Debt from a creditor. Do I owe taxes on debt discharged in bankruptcy? What do I do with this 1099?
Generally debt discharged in bankruptcy is not subject to tax liability. However, if you received a 1099, you must report it on your taxes. The way that you counter-act a 1099 is by filing an IRS Form 982. An IRS Form 982 is how you report to the IRS the fact that a 1099 is incorrect and that you should not incur any tax liability due to the improper 1099. The Form 982 and instructions on how to complete it is available on the IRS website. Most CPAs are also familiar with this form and can assist you in filling it out properly.
How long does the bankruptcy stay on my credit?
Chapter 7 cases last 7-10 years; Chapter 13 last 6 years.
How will debts that were wiped out in my case appear on my credit?
They will appear as “discharged” or “discharged in bankruptcy.”
I want to keep my house/car but it shows up on my credit report as “discharged” instead of “paid as agreed.” What does that mean?
All of your debts are discharged in bankruptcy regardless of whether you intend to keep them, unless you reaffirm the debt. Reaffirming a debt takes the debt completely out of bankruptcy as though you never filed bankruptcy at all with regard to that debt. The bankruptcy judges in our district frown on reaffirmations because it means that you can never walk away from that debt in the future. Our office policy generally is to NOT reaffirm debts so that they appear as discharged on your credit. This discharge means that you have the unlimited ability to walk away from the debt in the future if the item becomes not affordable to you. If you want to keep the house or car, you simply need to continue making your monthly payments. When the item is paid off, you will own it outright. However, if you can’t afford it, the discharge makes it possible for you to stop making payments without fear of collection from the lender. Beware of repossession or foreclosure though – if you stop making payments the lender cannot collect on the debt but they can foreclosure on a home or repossess a vehicle. So long as you keep up your monthly payments current, you will keep these items out of jeopardy.