Trading lower debt for higher tax

When you help a debtor-client negotiate a new deal with a creditor, don't be surprised if the debt reduction generates a tax increase. "[I]n a non-bankruptcy, noninsolvency context, debtors and creditors are often surprised that a debt modification that does not appear to reduce principal or the effective interest rate may nevertheless result in adverse tax consequences," writes Steven W. Swibel in the latest issue of the ISBA's Commercial, Banking and Bankruptcy newsletter. Learn more about the tax traps.