
Tax Considerations for Your Bankruptcy Filing in Los Angeles
Los Angeles Bankruptcy Attorneys Can Help You Understand
Debt problems can affect your tax status in ways you wouldn’t expect. If you are considering bankruptcy to solve your debt problems, it is important to understand potential tax implications. At RHM LAW LLP, our lawyers have the experience to help you see how bankruptcy will affect your entire financial picture, including tax considerations. We are committed to helping you achieve debt relief while avoiding any unnecessary tax liability.
Contact our firm for a free consultation with a Los Angeles bankruptcy attorney. It could be your first step on the road to debt relief.
Does Bankruptcy Have Tax Consequences?
In most cases, filing for bankruptcy has far fewer tax consequences than other debt relief options. For instance, if you work out a debt settlement with a lender, and your debt is reduced, the IRS will likely consider the reduction income and tax you on it. If you settle with a mortgage lender, and your home loan is reduced by $100,000, you just “earned” $100,000 in income and will be taxed on every penny of it.
This does not happen in bankruptcy. If you file for bankruptcy and receive a 1099 form from a creditor claiming you made income from a discharged debt, you should file a 982 form advising the IRS that the debt was discharged in bankruptcy and should have no tax consequences.
Bankruptcy & the IRS
Filing for bankruptcy enacts the automatic stay, which stops creditors from taking collection actions against you, including actions by the IRS. However, it does not stop the IRS from auditing you, making tax assessments, or demanding you file your tax returns. It is also important to note that filing for bankruptcy may affect your tax status in terms of what exemptions you are allowed or not allowed to take.
There are many tax considerations to make when filing for bankruptcy. Every case is different. If you have questions about how bankruptcy will affect your tax status, it is wise to consult with an experienced Los Angeles bankruptcy lawyer.
Contact RHM LAW LLP
Our offices are open weekdays from 7:00 a.m. to 7:00 p.m., and we serve clients in the Los Angeles area and San Fernando Valley through offices in Encino and Los Angeles.
Schedule your free initial consultation by calling our firm at (213) 344-0043.

RHM LAW LLP
Meet Our Los Angeles Bankruptcy Specialists
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M. Jonathan Hayes Senior Counsel
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Matt D. Resnik | Partner Partner
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Roksana D. Moradi-Brovia | Partner Partner
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Russell J. Stong III | Associate Attorney Senior Associate Attorney, Los Angeles Office
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W. Sloan Youkstetter | Associate Attorney Senior Associate Attorney, Los Angeles Office
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David M. Kritzer Senior Associate Attorney, Encino Office

Client Reviews
What Clients Say About Working With Us
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Fantastic office! I want to thank Matt for taking his time with me and sincere in his assistance. He spent over an hour with me for free during our initial consult. I left knowing exactly what's needed. He not only saved my house but also got rid of all my debt. They are not your typical attorneys and their creativity really allowed me to do things that other attorneys never mentioned in previous consults. Affordable and Outstanding firm and thank you for all you have done! My family thanks you!- David K.
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Where to begin? I had a vile evil credit union repo my car over a misunderstanding, they wouldn't work with me even when I offered full payment plus repo fees (this was my first repo!) so I didn't know what to do. I met with a few lawyers but when I met with Simon he broke things down and gave me my options. I needed a car - so I filed BK and included the car to get it back. The evil credit union fought and Simon GOT ME MY CAR BACK!!! His team is amazing!!!! Maria Donna etc!!! These are top-notch pros that'll have your back. I cannot recommend them highly enough. Sincerely they saved my life. LA with no car!? ARGH!!!!!! *THANX ALL!!!!- Tim C.
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This is to thank you for the exceptional work of you and your fine staff. In managing my bankruptcy and loan modification, a nearly five-year effort, your performance was stellar. I never felt alone or adrift, key concerns in those circumstances. The outcome was outstanding. As the dank blanket of economic uncertainty continues to depress the hopes of many of us, I keep your business cards and number available for others. Without hyperbole, I can attest that you are present a beacon. Thank you so much.- K.C.
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Dear Mr. Resnik: We wanted to thank you for your professional handling of our loan modification with GMAC mortgage. We are very happy that you were able to accomplish the modification of our loan in such a short period of time. Thank you again for your professional service.
- W and B Mejia -
Thank you for your great work on behalf of Ms. Johnson. Without the support of pro bono attorneys we couldn't do all the work we need to do, and your firm in particular is outstanding.
- Skip K. -
I worked with Matt and his team for about a year to get through the paperwork shuffle and my personal experience was nothing short of fantastic. Legal situations have a tendency to get hairy, but Matt and his staff conducted themselves with professionalism throughout the whole ordeal. To keep it short, let's just say he under-promised and over-delivered. Rarely would I ever say this about an attorney, but overall he was just a great guy. I would not hesitate to have him on my side of the courtroom again. World market is right across the street from his office and I even decided to get his staff a thank you / holiday gift card. World market has excellent craft beer BTW, try the Einstock White Ale. They also validate parking. That just shows this isn't a fake review.- Dean C.
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Was very impressed with the comprehensive professionalism of the firm, especially Matthew Resnik... I had suffered through the incompetence of two previous bk lawyers not to mention fees far greater than anticipated, without resolution. Having never gone through bk before, I did not realize how difficult it could be...then, my case was turned over to Mr. Resnik...almost immediately there was a marked positive difference. Where there was little to no communication, all of a sudden I am getting updates...regularly. Further, my case was finally discharged...yet, Mr. Resnik continues to communicate, offer assistance...and, has NEVER asked for additional fees, which I am sure he could have justified...much unlike the two previous attorneys with which I was dealing. I have no reservations, whatsoever, referring and recommending Matthew Resnik for any and all business or personal bk issues...or, other wise. I have no doubt that he will be transparent on helping you regardless of the problem. Good guy.. good firm... a wonderful experience!
- G.L -
Matt is the best bankruptcy attorney in Sherman Oaks. I consulted with Matt over a chapter 7 bankruptcy. I had issues with overwhelming credit card debt after Chase increased it's APR for no reason. It set off a chain of events that were really hurting me. He made me feel like I had options, all was not lost, and I could rebuild my credit after the 7. I had some concerns about a piece of property I was having issues with and Matt also turned out to be a real estate lawyer as well! I recommend this office to anyone who is unsure of their financial situation. It doesn't hurt to find out your options.- Max B.
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Matt and his team are the best!! They were thorough, extremely knowledgeable, wonderful to deal with, thoughtful, and really helped guide me through what was one of the toughest times in my life. I never felt judged or looked down on. They were efficient and really were lifesavers during this tough time. I can not recommend them highly enough!!!!- Rusty H.

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A Summary of Bankruptcy Law: Third Edition
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Summary of Chapter 13