Forgiven Debt = Taxable Income?

[chubby]

Just read a post by HHM regarding reporting forgiven debt to IRS as income. My stomach just turned. My chapter 7 was discharged 2 days ago. $120,000 of unpaid income taxes from 8 to 15 years ago (mostly interest & penalties). Problem is that only $12,000 of the debt is within 10 yrs. My lawyer told me that IRS can't collect any unpaid taxes over 10 yrs. old. Now it appears i will owe $30,000+ to IRS for this years income if this is true. I only gross $42,000 and net $31,000. What can I do? I wish my lawyer told me that forgiven debt = income because I feel I just made a bad situation terribly worse. Can I un-bankrupt and wait out the next 2 yrs. for the $12,000 most recent tax owed to reach the 10 yr. limit?

[chubby]

I guess the question is if you go bankrupt is that considered forgiven debt?

[HHM]

Don't worry, bankruptcy doesn't count.

Its when a "creditor" forgives more than $10,000, the creditor will issue a 1099.

Also, just a technical point, even though everyone speaks of debts being eliminated under BK, what really occurs upon discharge is a "permanent injunction" against collecting the debt.

[chubby]

Thanks HHM. Guess I am scared of IRS beyond description. My whole life starting at age 19 has been "under their thumb" so to speak. Self-employed with no witholding until 8 yrs. ago. Liens, levies, and threats were my way of life. Hope to move foward now. Can't wait for liens to be gone. Called lawyer today and he said, like you, "bankruptcy doesn't count" as income.