What happens if:

1-Prior to filing a Chapter 11 you paid all your credit card creditors 15 cents on the dollar

2-You went into the bankruptcy with only first and second mortgages on 20 1-4 family rental properties

3-You did not plan on cramming down the seconds, as there  may be 10%ish equity in maybe 5 properties, depending on date the Chapter 11 was filed.

4-The debt that was forgiven in #1 above was approx $195,000.

5-Tax is due on the $195,000 of debt that was forgiven, right?

6-In the ChaPter 11 bankruptcy (in which the debtor is just trying to start paying the mortgages again, albeit with lower interest rates) can the Bankruptcy court forgive the taxes due on the $195,000 in forgiven debt. 

7-Also, is the $195,000 taxed as Captial Gains?  And what is the Capital gains rate in 2008?

8- In NJ, how does the (Difficult!) state tax the $195,000 forgiven debt.

9- And further, if there was a sort sale prior to the Chapter 11, how would that forgiven debt be handled by the IRS & the State of NJ.

10- And yes I am in NJ and I am looking for representation by a firm that can answer these questions (without looking up the answers) and more.  I need potential pre Chapter 11 bankruptcy planning.