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Posted by Stuart A. Bronstein on January 21, 2007, 4:57 pm
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> Under the facts as described, the OP is legally liable to
> pay the loan since he was the co-signer, and, assuming that
> the loan was otherwise a "qualified education loan" the OP
> can claim a deduction for student loan interest paid. See
> Treas. Reg. 1.221-1(b)(1).
>
> Since the OP's son is no longer legally obligated to pay the
> loan (I assume that was the effect of his bankruptcy), he
> cannot claim the deduction because there must be a legal
> obligation to pay such interest. See Treas. Reg.
> 1.221-1(b)(1).
A discharged debt can be reaffirmed under bankruptcy law,
which revives the legal obligation to pay.
> If the OP wants to give his son the benefit of the
> deduction, the OP should claim it and then give his son cash
> equal to the tax benefit of claiming the interest. If the
> OP is in the 20% bracket and the payment was $110, the OP
> would then give his son $22. That's clearly within the
> limits for excludable gifts.
That would certainly be the easiest way, and probably the
most cost effective as well, since the parent is probably in
a higher tax bracket than the child, so the savings would be
greater when the parent takes
the deduction.
Stu
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Posted by Shyster1040 on January 23, 2007, 2:42 am
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> A discharged debt can be reaffirmed under bankruptcy law,
> which revives the legal obligation to pay.""
True enough, but if the primary debtor had reaffirmed the
debt, then (a) there is a distinct possibility that the
co-signor would be off the hook because (i) he most likely
did not reaffirm the debt (which is tantamount to making a
new debt) and (ii) the reaffirmation could be treated as a
modification of a debt that excuses performance by the
guarantor (in this case, the co-signor is most likely to be
treated as an accomodation party rather than a substantive
debtor, and thus accorded the status of guarantor rather
than primary obligor on the debt). As a result, the lender
would be able to look to the original debtor to pay the
debt, but would probably have lost their claim to require
repayment by the co-signor/surety, in which case they would
have sent the interest reporting form to the original debtor
who had reaffirmed the debt instead of to the
co-signor/surety.
On that basis, it seems reasonable to assume, in the absence
of further facts, that the OP's son did not reaffirm the
PLATO debt after his discharge. As a result, only the OP
would have a legal obligation to pay the interest.
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Posted by Seth Breidbart on January 25, 2007, 3:02 am
Please log in for more thread options >> A discharged debt can be reaffirmed under bankruptcy law,
>> which revives the legal obligation to pay.""
> True enough, but if the primary debtor had reaffirmed the
> debt, then (a) there is a distinct possibility that the
> co-signor would be off the hook because (i) he most likely
> did not reaffirm the debt (which is tantamount to making a
> new debt) and (ii) the reaffirmation could be treated as a
> modification of a debt that excuses performance by the
> guarantor
I don't see why the creditor should lose the guarantee by
the guarantor based on actions taken purely by the debtor.
> (in this case, the co-signor is most likely to be
> treated as an accomodation party rather than a substantive
> debtor, and thus accorded the status of guarantor rather
> than primary obligor on the debt).
That's always been his status.
> As a result, the lender
> would be able to look to the original debtor to pay the
> debt, but would probably have lost their claim to require
> repayment by the co-signor/surety,
Again, how can the guarantee just go away?
Seth
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<< The foregoing was not intended or written to be used, >>
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<< that may be imposed upon the taxpayer. >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Stuart A. Bronstein on January 26, 2007, 5:39 am
Please log in for more thread options >> True enough, but if the primary debtor had reaffirmed the
>> debt, then (a) there is a distinct possibility that the
>> co-signor would be off the hook because (i) he most likely
>> did not reaffirm the debt (which is tantamount to making a
>> new debt) and (ii) the reaffirmation could be treated as a
>> modification of a debt that excuses performance by the
>> guarantor
> I don't see why the creditor should lose the guarantee by
> the guarantor based on actions taken purely by the debtor.
If there is a change in the underlying agreement that the
guarantor did not agree to, he is not bound by the change.
And he may be off the hook with respect to the original
agreement because it has been terminated in favor of another
one.
Stu
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
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<< to this newsgroup as well as our anti-spamming policy >>
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Posted by Seth Breidbart on January 31, 2007, 5:12 pm
Please log in for more thread options >>> True enough, but if the primary debtor had reaffirmed the
>>> debt, then (a) there is a distinct possibility that the
>>> co-signor would be off the hook because (i) he most likely
>>> did not reaffirm the debt (which is tantamount to making a
>>> new debt) and (ii) the reaffirmation could be treated as a
>>> modification of a debt that excuses performance by the
>>> guarantor
>> I don't see why the creditor should lose the guarantee by
>> the guarantor based on actions taken purely by the debtor.
> If there is a change in the underlying agreement that the
> guarantor did not agree to, he is not bound by the change.
> And he may be off the hook with respect to the original
> agreement because it has been terminated in favor of another
> one.
Was it terminated or just modified? Re-affirming doesn't
create a new debt, it underscores the validity of the
existing one.
Consider: A lends $5,000 to X, guaranteed by Y. X pays off
$1,000 then stops, and later files bankruptcy. A raises the
$4,000 remaining to $6,000 to cover fees, etc. as provided
in the contract.
Y should still be on the hook for $4,000 (his original
$5,000 less the $1,000 paid by X). (I'm ignoring interest,
all payments mentioned are principal.) It isn't fair to Y
that A and X can increase his debt, nor is it fair to A that
X and Y can decrease it (without both filing bankruptcy).
Seth
<< ======================================================= >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
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