Legal Question in Tax Law in California

A friend of mine filed for Chapter 13 bankruptcy. He has a rental property that he decided to "let go" or foreclose. His current loan balance on that property is around $340k. The current market value of same property is around $250K.

If the Chapter 13 repayment has been completed and discharge issued, what are the repercussions, if there's any, regarding tax? Would he pay tax for anything on that rental property that was foreclosed?

Thank you.

Asked on 3/19/12, 7:27 pm

1 Answer from Attorneys

Michael Stone Law Offices of Michael B. Stone Toll Free 1-855-USE-MIKE

Normally in a Chapter 13 bankruptcy a debtor can have the loan modified by the court on underwater rental properties. Your Friend should fire his lawyer and find one who knows how to "cram down" a rental property in a Chapter 13 plan. I hope they haven't foreclosed yet.

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Answered on 3/19/12, 7:39 pm

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