The Bankruptcy Law Clinic Blog

Florida has a statute that keeps this income safe from creditors who seek judgment against you.  This means that most creditors cannot garnish your disability wages-but there is an exception....

“Stop foreclosure now!”  Ever seen a handmade sign bearing these words on the side of the road?  Or perhaps you’ve received an email from someone who promises to work with your bank and keep foreclosure from happening?  Foreclosure defense and “avoid foreclosure now” promises are everywhere....

According to IRS regulations, when debt is canceled or forgiven by a lender, the amount that has been canceled is considered income for the debtor during tax time and must be reported as income.  In light of the recent housing and foreclosure crisis, this regulation would be especially frightening for the thousands of Americans who are going through loan restructuring and modification processes, or having their mortgages canceled due to foreclosure. 

However, when the economy took a turn for the worst, and right before the housing bubble burst, Congress passed the Mortgage Forgiveness Debt Relief Act of 2007, which allowed homeowners who were already having financial trouble to avoid having to pay taxes on their forgiven or foreclosed mortgages.  In fact, according to that Act, if part or all of your mortgage debt is forgiven in any tax year from 2007 to 2012, you might be able to exclude a substantial amount of that forgiven debt from your taxable income when tax time rolls around. 

The debt that qualifies for this must have been incurred for your principle place of residence (not a vacation home), and can include debt that has been canceled through foreclosure or debt from mortgages that were reduced through restructuring or modifying the loan.

From the IRS website, here are a few additional facts about Mortgage Debt Forgiveness.

   1.  The limit is $1 million for a married person filing a separate return.

   2.  To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

   3.  Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

   4.  Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

What's better for me in the long run- filing bankruptcy or taking a 401k loan to pay off my debts? In Florida, more times than not, a bankruptcy is the better option. Here's why.....

Sometimes a picture is worth a thousand words, but how about a picture of a thank you letter? 

 I recently received a discharge notice for Miguel C. that caught my eye.  His was an especially rewarding case.  He had been a law enforcement officer for ten years and had partial ownership in a business.  He earned over 80k a year but had over 50k in credit card debt and a growing family, that made meeting his monthly obligations impossible.