Since I claimed bankruptcy, I don't have enough mortgage interest to claim as a deduction, therefore I now have a large amount of tax debt to repay ($20k or more). I did not realize this would happen when I claimed bankruptcy.
Post petition tax obligations can be included in an amended or modified Chapter 13 plan. However, $20,000 post petition debt is a lot of priority debt to include in an already ongoing Chapter 13 plan.
The real question is can you afford to pay so much new priority debt in your existing plan? If there is a lot of money already going to unsecured creditors in your current plan then maybe you can. Otherwise you will need to generate enough additional income to amortize $20,000 over the remaining number of months left in your plan.
It is important that you consult with your bankruptcy attorney on this matter as it is VERY case and fact specific. If you don't yet have a Chapter 13 attorney I strongly recommend one be consulted and hired at this time. Good Luck.
The only reason I see that your mortgage interest deduction should change is if you are surrendering your house through your bankruptcy and can therefore no longer claim the deduction. If that is the case, I don't know of a way to change your tax obligations. An increase of $20k in your tax obligation due to a surrender of your mortgage/house and a resulting change in your tax bill seems awfully high since the top federal marginal tax rate is 35% your home mortgage interest would need to be close to $60k/year or nearly $5k/month, are you sure about the magnitude of the change? Talk to your attorney about this.
You may be able to add the new taxes into your plan, but then you must reanalyze the plan payments. You need to talk to your bankruptcy attorney. If you do not have one, then consider hiring a very good chapter 13 attorney
Here is information that I send to folks considering bankruptcy. I understand this might be a little late for you, but here is some great information in the videos.
Please understand that chapter 13 bankruptcy is a very complicated process. It is wise to talk to an experienced chapter 13 bankruptcy attorney before deciding to take this important step. I am attaching a link to some free videos that explain how bankruptcy works. Most Arizona consumer bankruptcy attorneys offer a free consultation about the basics of bankruptcy.
Please take time to educate yourself about bankruptcy and to determine which attorney is the best to assist you in the process. Don’t assume the attorney is being completely honest about their experience and capabilities. Check them out. Avoid the attorneys who advertise on TV or profess a 100% success rate in their Internet ads. It costs hundreds or thousands of dollars for these ads and someone has to pay for them – the clients. These attorneys mass produce the work and do not offer the client the hands on assistance that is necessary in a well-planned bankruptcy. Normally these firms assign all or most of the work to paralegals and the client rarely talks to an attorney.
When interviewing the attorney ask them how long they have practiced bankruptcy law. Ask what percentage of their practice is focused on consumer work. Ask whether they are experienced in both chapter 7 and chapter 13 cases. Ask the attorney for references. Ask about their policy of returning phone calls. They should be committed to answering specific questions about your situation and help you understand your options. If, after talking with them you are still confused about the issues you raised, find another attorney. Check them out with the various ranking sources: such as www.AVVO.com, and the State Bar. An attorney is should be your guide through this process. They should educate you, be there to assist you in how to avoid pitfalls and help you plan for your future after bankruptcy. There are hundreds of “bankruptcy” attorneys in Arizona. Of those just a few will fit the criteria set forth above. Again, bankruptcy is a very complicated process and you want to use an attorney who will be there when you need them.
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Along with the other attorneys, I am not sure how bankruptcy could affect your interest deduction.
If anything, it is possible it may increase due to making up back payments through the plan.
In other words, there must be some information that is not in your post.
Supplement your post and I will check back.
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