Home > Personal Finance > Just Received a 1099-C? Don’t Freak Out!

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Over the past week we’ve been flooded with panicked questions from taxpayers who are freaking out after have receiving 1099-C or 1099-A forms for debts that were forgiven, never paid back or wiped out in bankruptcy. The main theme of these questions is “Do I have to pay taxes on the amount on the 1099-C (or 1099-A)?”—usually followed by “HELP!!?”

My first piece of advice: Take a deep breath! You may not have to pay taxes on the amount of the income listed on the 1099-C or 1099-A.

At the same time, doing nothing is not an option. If you got a 1099-C or 1099-A, so did the IRS. That means you must explain to the IRS why that amount should not be included in your income. If you don’t, the IRS will assume that money counts toward your income and you may either get a smaller tax refund than you expected or, worse: A bill from the IRS.

How can you avoid including that amount in your taxable income? By showing that you qualify for an exclusion or exception. I described these in my previous article, How to Avoid Taxes on Cancelled Debt, and more details are also available on the IRS website.  You may be able to simply fill out Form 982, claim an exclusion or exception, and be done with it. Sometimes it’s more complicated than that, though, and you need to work with a tax professional.


Here are a couple of examples of questions we received recently about 1099-Cs:

1099-C for Debt Wiped Out in Bankruptcy

I included my automobile with my bankruptcy in 2010, it was a Chapter 7. However I received a 1099 for the car that I included in the bankruptcy. What do I do now? Must I pay the taxes on this large amount even though it was included in my bankruptcy? Please help.

Debt that was discharged in bankruptcy can be excluded from your taxable income. Take a look at Form 982. At the top of the form you’ll see box 1 a. Discharge of indebtedness in a title 11 case. (Don’t be confused by the reference to “Title 11”—that’s just the part of U.S. Code that covers bankruptcy).  You can check that box. Then on Line 2, you’ll put the amount that was discharged in your bankruptcy for that debt and any others that were reported on a 1099-C. That amount will be excluded from your income. It should be simple enough.

Student Loans Cancellation

My student loans were discharged. I am on Social Security. Do I have to file the 1099-C I received for $62,000? My student loans were discharged due to total disability and I don’t file taxes because Social Security is non-taxable….HELP!!!!

First, keep in mind you don’t file the 1099-C; the lender does. A copy has already been sent to the IRS. So you must now demonstrate to them that part or all of that “income” is not taxable. How do you do that? By figuring out whether you qualify for an exclusion or an exception, and if you do, filing form 982.

You mention that your student loans were “discharged.” Do you mean discharged in bankruptcy? Or do you mean they were cancelled due to your total disability? If they were discharged in bankruptcy, then read the previous question and answer for more information on how to claim the exclusion for bankruptcy debts.

If they were cancelled, however, then it’s not quite as simple. According to the IRS, “Generally, if you are responsible for making loan payments, and the loan is cancelled (forgiven), you must include the amount that was forgiven in your gross income for tax purposes.” There is an exception for student loans that were used to attend a qualified educational institution and were cancelled because you worked for a certain period of time in certain professions. (An example would be a doctor who works in a qualified low-income area.) I didn’t find any reference to an exception or exclusion for student loan debt that was cancelled due to disability, though.

However, you may qualify to have part or all of the $62,000 excluded from your income if you are considered by the IRS to be insolvent. You’ll see a simplified example of how that works on our Infographic: What to Do If You Get a 1099-C. Review Form 982 and the instructions to see if you feel comfortable filling it out yourself. If not, your disability may qualify you for free or low-cost tax help through the Volunteer Income Tax Assistance Program.

Finally, if you’re worried about how your debt or other issues could be impacting your credit, you can check your credit each month using Credit.com’s free Credit Report Card. This completely free tool will break down your credit score into sections and give you a grade for each. You’ll see, for example, how your payment history, debt and other factors affect your score, and you’ll get recommendations for steps you may want to consider to address problems. In addition, you’ll also find credit offers from lenders who may be willing to offer you credit. Checking your own credit reports and scores does not affect your credit score in any way.

For more strategies for dealing with 1099-C’s read:

Please keep in mind that I am a credit expert, not a tax expert, and the information in this post is strictly for educational purposes. See a tax professional or contact the IRS for help with your individual situation!

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  • Marco Feola

    my wife received a 1099c today after just learning last week that her disability discharge on her student loans had gone through, as previous commenter down below said, she doesnt work and i wait tables, i make less then 28,000 a year and we have a 2 year old, but we’re being taxed on over $100,000 worth of debt, and we had a bankruptcy/foreclosure going back a few years ago during the housing market collapse, do we have any options? we have nothing and were finally starting to bounce back.

  • Tim Wright

    I received. A 1099-c for $2348….for unresolved credit card debt from 3 years ago. I am a 100% disabled veteran, I have not worked or filed taxes since 2010. What do I do?

  • cleojones

    I have several credit cards (7), I would like for each one of them to take 500.00 off my bill before I pay it off in full. Is it possible for me to do this and to avoid getting a 1099C from each one of my creditors. The amounts on each card are low and the highest one has 6K on it.

  • Jimson

    In a deed in lieu is the date the debt was canceled the date the deed in lieu was fully executed(lien released), or when the lender issues the 1099? The reason I ask is because I am currently insolvent right now, but if I have a good year, I won’t be at the end of the year. The IRS form says “Total liabilities immediately before the cancellation” So I’m wondering when immediate before the cancellation means…any ideas? Been searching all over and your article is the best resource I have found. Other info I found says it is when they issue the 1099, but if this isn’t until the end of the year, that is much later than when the debt was actually canceled.

    • http://www.credit.com/ Credit.com Credit Experts

      You may want to consult a tax professional on this.



    • http://blog.credit.com/author/christine-digangi/ Christine DiGangi

      Hi, Fanny. Your best bet is to take your questions to a tax attorney or tax professional.

  • Jeanine Skowronski

    You may want to consult a tax accountant or attorney about your best recourse.

    Thank you,


  • Jenn

    I didn’t work much in 2015. I just filedon’t my taxes and received EIC but not child tax credit for my 2 children claimed because I only had 2 thousand in income last year. I just got a 1099-c for 6k. Will that increase my income enough to give me the child tax credit? My ex only made 9k last year and he got back a lot because he got the tax credit on our other two children he claimed. Please explain.

    • Jeanine Skowronski

      You may want to consult a tax accountant or attorney to find out your best options here.

      Thank you,


  • Eugene Williams

    I just settled a debt for a loan with Avant. I took out $8,100. They say I owe $10,200 and I settled with them for $2,600. They said I will get a 1099-C for anything over $600. I receive SSI. 1- Will that affect my monthly SSI? and 2- Will I have to pay taxes on the difference?

    • http://www.Credit.com/ Gerri Detweiler

      As I mentioned in the article, the forgiven debt is considered taxable income unless you qualify for an exclusion such as the insolvency exclusion. You’ll want to get IRS Publication 4681 (available online ) and fill out the insolvency worksheet to see if you qualify.

  • k.f. sullivan

    This is a little off topic but it does concern student loan debt. I have been in default for a long time. I receive social security disability and am now applying for discharge. I am poverty level. I have been working on my credit so that I may purchase a home for my 8 year old son and myself. My student loans no longer show on either of the three credit reports. I want to apply for an FHA loan but reading the guidelines it states that you cannot be in student loan default. I am not yet through with the discharge. My question is this…..if its not showing on my credit reports will FHA still know I am in default?

    • ScottSheldonLoans

      More than likely, no, but this is merely I guess as I’ve never had that question before.

  • Nollege

    Will a 1099C on my tax returns prevent me from being eligible for a mortgage loan? My husband and I want to start looking for a house, but he received a 1099C for a property that he was previously involved with. Our credit is good and we didn’t have to pay any taxes on the cancelled debt. Just wondering if mortgage lenders will look at that or not?

    • http://www.Credit.com/ Gerri Detweiler

      I don’t see how. But since it’s a good idea for you to get preapproved for a home loan before you start shopping you can bring that up to the lender.

    • ScottSheldonLoans

      What was it? A previous short sale? They may ask about it. Its three years out of a short sale for an FHA loan with a 3.5% down payment requirement for 20% down after four years for a conventional loan post short sale. Same guidelines for FHA applies if it was a foreclosure. 7 year waiting time frame for a conventional loan post foreclosure.

  • Daniel Hall

    Received a 1099-c from company that was the less of two mort. I took out to purchase my home(primary residence) I think I know how to report for taxes….My question is do I still owe that company that money? My house is in forecloser but I am trying to work it out with my larger of the 2 mort. …As in…If I sell the home do I owe the 2nd “cancelled” mort. the money
    Morg #1 $90K..Owe 80K (In forcloser)
    Morg #2 25K..1099c for 23K (130,000 fair price and F in box 6)
    Do I owe mrt. #2 the money still????

    • http://www.Credit.com/ Gerri Detweiler

      Whether you owe a deficiency is a separate issue from the tax reporting. It’s confusing I know, but the IRS says that a 1099-C does not necessarily mean the debt is cancelled. The statute of limitations may be a better indicator of whether they can still try to collect.

  • May

    I just received 1099-c for Short Sale of a home after the
    divorce in 2013.Amount of debt discharged is $92,672.00. I have already filed
    my taxes as Head of Household for 2014. Do I now need to redo last year filing
    or just wait to hear from IRS? What would be the estimated tax payment on this
    amount? Am I responsible for half of it or can I file form 4681? Thanks!

    • http://www.Credit.com/ Gerri Detweiler

      First you need to find out if you qualify for one of the exclusions (insolvency, Mortgage Debt Forgiveness Tax Relief Act). Then you either need to pay taxes on the cancelled amount or claim the exclusion using Form 982. These articles go into more detail: What is a 1099-C? Your Top 11 Questions Answered and Help! I Did My Taxes Wrong

  • tina

    We lost our home to foreclosure 13 years ago and now we got a 1099c for $24,491.05 what am I to do

    • http://www.Credit.com/ Gerri Detweiler

      That’s a really old debt! But if you qualify for the Mortgage Debt Forgiveness Tax Relief Act you may be able to claim that exclusion and avoid taxes on that debt. Have you reviewed that option? Look at IRS Publication 4681?

  • http://www.Credit.com/ Gerri Detweiler

    Creditors don’t necessarily have to file Form 982 for debts discharged in bankruptcy. If they do in future years, you should be able to use Form 982 to exclude any amounts cancelled in bankruptcy from your income.

  • http://www.Credit.com/ Gerri Detweiler

    They may be subtracting the funds they got from the PMI lender. We wrote more about PMI and foreclosures/ short sales here: Mortgage Insurance Shocker: Collections After Default

    I don’t have a list of all 50 state’s regulations regarding CODI unfortunately. You’ll need to consult with a tax professional in your state.

  • http://www.Credit.com/ Gerri Detweiler

    Nelnet has taken the position that the loan is canceled in the first year. If you didn’t qualify for an exclusion such as the insolvency exclusion and had to pay taxes on that amount, but it was later determined you no longer qualified for the loan forgiveness, then you would have to amend that tax return. At least that’s my understanding, but I’m not a tax professional.

  • http://www.Credit.com/ Gerri Detweiler

    You use the instructions in IRS Publication 4681 to find out if you qualify for an exclusion, such as the insolvency exclusion. (There’s a worksheet in there that you fill out to find out if you qualify.) If you do, then you use Form 982 to tell the IRS why you are not including the amount of canceled debt with your taxable income.

    I do understand how it can get confusing. Because you and your wife have low income, and you are disabled, I’m sure you qualify for free tax assistance.

    Read: The Complete Guide to Finding Tax Help

    Another option would be to get the ZipDebt Insolvency Calculator which will walk you through the form.

  • soria

    My employer gave me a w2 form plus a 1099… the IRS is taking away my taxes return plus still owning 700 bucks….. can I claim any expenses lime gas, miles,food uniform? But the only issue is that I do not have receipts….. can I report my employer?

    • http://www.Credit.com/ Gerri Detweiler

      I am sorry I can’t be of help but a 1099-c is for cancelled debt. I assume you got a 1099-MISC for additional income. You’ll need to talk with a tax professional or use a tax preparation program to figure out what your options are for deducting those expenses.

  • Ang

    i recieved 1099c to a VA backed loan do i need to claim this what do i do

    • http://www.Credit.com/ Gerri Detweiler

      You must always deal with a 1099-C or the IRS will assume it is taxable income. As the article states, you need to figure out if you qualify for one of the exclusions, and if you do, file Form 982 to tell the IRS why you are not including it in your taxable income. Maybe this article will be clearer for you: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

  • Ben

    I received a letter from the irs saying they made changes to my taxes, they send me a canceled of debt form due to a kirby vacuum i stoped payin, i dont know what step to take should i just go ahead and pay what theyre asking or is there something i can do??? Please help!

    • http://www.Credit.com/ Gerri Detweiler

      If I understand your situation correctly, the IRS has notified you about income from canceled debt that a debt collector reported in a previous year. My guess is you either didn’t get the 1099-C form or you didn’t understand it when you received it. You either need to pay the taxes or you can try to find out whether you qualify for the insolvency exclusion. It can be a little confusing (okay very confusing) but the instructions are in IRS publication 4681. Specifically, you are looking at the insolvency worksheet. Other resources you may find helpful include the ZipDebt Insolvency Calculator and Dan Pilla’s book, How to Eliminate Taxes on Debt Forgiveness .

      Read this article too: Help! I Did My Taxes Wrong

  • jason1000

    Insolvency does not appear on credit report. It is not the same as Chapter 11. Only the debt appears if is was a settlement from a creditor or such. If the debt was waived proactively such as the recent settlement from the large banks then it will not appear on your credit report either.

  • http://www.Credit.com/ Gerri Detweiler

    We wrote an article about that here: Help! I Did My Taxes Wrong

  • Bret

    i received a 1099 c for a student loan that i did not pay well because honestly i forgot i had it and it now has been cancelled im about to file and know i will need to pay taxes on it but how will it affect my credit and will it get that loan removed from my credit or what should i expect

  • http://www.Credit.com/ Gerri Detweiler

    You need to file IRS form 982 with your tax return to explain to the IRS why you are not including this amount in your taxable income. Unfortunately I’m not clear on your scenario, but if the amount listed is due to debt discharged in bankruptcy you check box 1 a. If you are entitled to the insolvency exclusion you check box 1 b.

    Instructions and the worksheet are in IRS Publication 4681. Other resources you may find helpful include the ZipDebt Insolvency Calculator and Dan Pilla’s book, How to Eliminate Taxes on Debt Forgiveness .

  • http://www.Credit.com/ Gerri Detweiler

    The creditor is reporting 4276.33 in cancellation of indebtedness income. You must include that amount in your ordinary income unless you qualify for the exclusion or exception, such as the insolvency exclusion. There’s a worksheet in IRS publication 4681 the you can use to figure out whether you qualify and can avoid paying taxes on this amount.

  • http://www.Credit.com/ Gerri Detweiler

    Box 2 reports the amount of cancelled debt that must be included in your income. But make sure you fill out the insolvency worksheet in IRS publication 4681 to see if you qualify for the insolvency exclusion. And if this canceled debt is related to a mortgage, find out if you qualify for the Mortgage Forgiveness Debt Relief Act exclusion.

  • http://www.Credit.com/ Gerri Detweiler

    Take what off your credit report – the debt? Not necessarily. If it was a charged off account, for example, the charge off can be reported for seven years.

  • http://www.Credit.com/ Gerri Detweiler

    Here is the IRS information on how to file an amended tax return.

    Please keep in mind I am not a tax professional. You may want to call the IRS or talk with a tax professional to make sure you proceed correctly.

  • http://www.Credit.com/ Gerri Detweiler

    The IRS will probably come back to you in the future about this. They have the form from the creditor and will expect you to include that amount in your income unless you can demonstrate that you qualify for an exclusion. My understanding is you will have to file an amended tax return.

  • bptr

    So is the 1099-C amount considered “Earned Income” or “Unnearned Income”?

    • http://www.Credit.com/ Gerri Detweiler

      It isn’t spelled out in Publication 4681 but my understanding is that it is taxed as normal earned income.

  • Josh C

    I just recieved a form 1099-C from a company that i had owed money to. My lawyer reached an agreement with them which i paid in one payment to them. I was never in court over this and both sides came to an agreement?? Why do i need to file this form for $9,000?? I have all of my documentation from this company stating i was never given the chance in court to dispute anything as well. All of my information they had was incorect. I believe they had just bought this debt and were happy to get something.

  • http://www.Credit.com/ Gerri Detweiler

    If they officially settled the debt with you in 2013 than they should have filed the 1099-C that year as well. I’ve seen a lot of mistakes with these forms, so it’s possible this is one of them. If you qualify for the insolvency exclusion right before the debt was canceled (the worksheet is in IRS publication 4681), that may be the easiest way to deal with it. You claim the insolvency exclusion and file form 982 with your taxes explaining that you’re doing that. If you don’t qualify, then you may need to dispute this form but that isn’t always a simple process. We wrote more about that here: The Little-Known Form for Avoiding a Big Tax Bill

    While you are at it, consider filing a complaint with the Consumer Financial Protection Bureau and the Taxpayer Advocate.

  • http://www.Credit.com/ Gerri Detweiler

    You’ll need to amend your return of the IRS will assume it is taxable income and assess you accordingly. Make sure you to read IRS Publication 4681 to see if you qualify for an exclusion mentioned in this article.

  • http://www.Credit.com/ Gerri Detweiler

    Read IRS publication 4681 and see if you qualify for the insolvency exclusion. If not, get help from a tax professional. You may be eligible for free help due to your disability. The Complete Guide to Finding Tax Help

  • http://www.Credit.com/ Gerri Detweiler

    Liz – The IRS assumes that is taxable income unless you can show otherwise. You need to read IRS publication 4681 to see if you qualify for the insolvency exclusion (in which case you may have to file an amended return). If you don’t understand it you may need to get help from a tax professional. Read: The Complete Guide to Finding Tax Help

  • http://www.Credit.com/ Gerri Detweiler

    You need to complete the insolvency worksheet in IRS publication 4681. The tricky part is that you don’t know the date to calculate it since you don’t know when they will send the 1099-c. If you are not at all eligible for the insolvency exclusion then you would have to add the amount they forgive ($18,000) to your tax return as income. If you normally get a refund that could take part or all of your refund. You could also owe taxes. On the other hand, you may qualify for the insolvency exclusion in which case you won’t have to include any of that amount in your income. (Or you may be in between and get a partial exclusion.)

    If you don’t understand the worksheet in Publication 4681 I’d recommend you talk with a tax professional as soon as possible.

    And if it turns out you will owe more taxes and it will create a hardship for you, you may want to talk with a bankruptcy attorney as soon as possible. Debts discharged in bankruptcy are not taxable.

  • http://www.Credit.com/ Gerri Detweiler

    So if I understand your question Joy, the IRS sent you a notice – is that right? And are they saying you owe taxes from a 1099-c filed in 2012 for a debt you last paid on in 1999?

    Please read this article for information on your options:
    The Little-Known Form for Avoiding a Big Tax Bill

  • http://www.Credit.com/ Gerri Detweiler

    I don’t understand the question. Why would you receive a 1099-C if you are selling your home for a profit? Wouldn’t the mortgage be paid off in full?

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    I think you have a better shot of asking them for time to make the lower pay off you negotiate if you reference the tax return, or anticipated tax return loan, as a source of funds.

    I am not a fan of tax refund loans at all, but there is a time and a place for something like that (if you use one of these types of loan products, or get them to agree to wait by inferring a tax loan, or refund).

  • http://consumerrecoverynetwork.com/ask-a-question/ Michael Bovee

    Who is it that sued, and who is the collection attorney that was hired? If you have heard from any different collector since the judgment was entered, who was that?

    You can try to negotiate the deal with, say the end of the month to pay, but will need to time this well. The outcome, in my experience, can vary depending on who the collectors are that you must deal with.

  • Latasha

    My husband and I filed a BK 7 in 2011 we included our mortgage it was discharged. We continued to live in our home. The bank just forgave the entire mortgage and released the deed to us. Are we responsible for IRS taxes on that amount?

    • http://www.Credit.com/ Gerri Detweiler

      Taxpayers can claim an exclusion for debts discharged in bankruptcy. (That’s if the lender sends a 1099-c – they may not.) You will find more information in IRS Publication 4681.

  • Jackie Hall

    i am considing filing bankrupcy… because after working with careone on my debts… now in 3 days.. i am being sued in court over a loan…i been working towards… i feel helpless… i can’t get a legal aid lawyer to come to the civil hearing.. i am going into this blind and need help…will not filing my 2013 keep me from being able to file bankrupty..and many of you walked this path already to get to this point… any advice??? i don’t want to lose everything. i own over the fact i was trying..and i had to the face the hard fact i couldn’t do it anymore… went to a debt agency for aid..thinking i was safe.. i could went bankrupted but i felt i didn’t trail this path… i would have given up on my dreams..it’s all overwhelming..now i feel like it’s the only way out..

  • http://www.Credit.com/ Gerri Detweiler

    It’s hard to tell. My first concern would be whether they can come after you for the difference – the deficiency. And then my second concern would be a 1099-c. The tax form could come later. Sometimes they are issued after three years of no collection activity.

  • http://www.Credit.com/ Gerri Detweiler

    You will need to talk with your bankruptcy attorney about this. Unfortunately, it’s not something we could advise you about – bankruptcy law varies by state and also depends on your individual circumstances.

  • http://www.Credit.com/ Gerri Detweiler


    This is a situation where you really need to consult with a tax professional who understands these forms. (Not all do, so make sure you consult with someone with the specific experience you need.) Unfortunately, when it comes to rental properties and joint debts it can become quite complicated. If you have trouble finding someone who’s an expert let me know.

  • http://www.Credit.com/ Gerri Detweiler

    The IRS specifically states that the issuance of a 1099-C doesn’t mean the debt is no longer collectible. (I know, kind of crazy right?) That is a matter of state law and the contract. Unfortunately consumers don’t always know this and they may have been better off filing for bankruptcy.

    My understanding is that there have been some court cases where the issuance of the 1099-C was used successfully to dispute the debt. I’d recommend you talk to a consumer law attorney.

  • http://www.Credit.com/ Gerri Detweiler

    This is a tough one. The IRS says specifically the 1099-c doesn’t mean that the debt isn’t owed, but there have been some court decisions where consumer law attorneys have challenged the collection of the debt saying that the fact that the 1099-c was issued means it was not owed. You can consult a consumer law attorney to find out what they think. If that’ doesn’t work, then you can likely amend your tax returns to back out that forgiven debt. I don’t know if that means you get a refund but hopefully it will offset it a little.

  • http://www.Credit.com/ Gerri Detweiler

    Unfortunately the 1099-c and the judgment are two separate issues. The judgment is a legal matter and there can be significant consequences as we described in this article: Creditor Gets a Judgment Against You – Now What?

    There have been some cases where courts have determined that the 1099-c essentially means the creditor can’t collect, but that won’t make the judgment go away. I’d suggest you consult a consumer law attorney who is familiar with these issues for advice. Visit NACA.net for a list of consumer law attorneys in your area.

  • http://www.Credit.com/ Gerri Detweiler

    A 1099-c does not directly impact your credit. As for how the mortgage is reported, have you checked your credit reports?
    Here’s how to get your free annual credit reports.

  • http://www.Credit.com/ Gerri Detweiler

    Krisna – It sounds like there is a good chance that it is too old and he will have to dispute it. I wrote about that in this article: The Little-Known Form for Avoiding a Big Tax Bill If you don’t feel like you can handle this yourself you may want to find a CPA or tax attorney who does have experience with these forms.

  • http://www.Credit.com/ Gerri Detweiler

    You must deal with it one way or another because the IRS will expect you to pay taxes on that “income” unless you demonstrate otherwise. It gets rather complicated when cosigners are involved however. Take a look at IRS Publication 4681 search for the word “joint.” The IRS talks about how these debts are too be handled in that publication. though it doesn’t address every situation. If you still don’t know what to do after reading that they I would encourage you to hire a tax professional with expertise in these forms to help you. No doubt the amount is large, and the last thing you want to do is to pay taxes that you don’t have to pay – or be told by the IRS that you haven’t paid enough.

  • http://www.Credit.com/ Gerri Detweiler

    Their source of income is not the issue. The issue is that they must report this amount as “income” on their tax return unless they qualify for one of the exclusions I described in the article. There is more information in Publication 4681. They probably qualify for free tax help if you and they can’t figure it out. Learn more here:
    The Complete Guide to Finding Tax Help

    Hope that helps!

  • Chase

    OK…my turn.
    I had a 1st & 2nd TD with Chase. The 2nd was a non-purchase HELOC. After the real estate crash I lost my business and negotiated a short sale. They settled and long story short is that they rolled the balance of the HELOC onto my credit as a consumer debt. This was never disclosed to me at the time. That was in 2010. I since have recovered professionally however still have several of the debts lingering. SOL in my state is 4 years. I am about there now. Chase is sending offers to settle that debt for a fraction of the debt. My goal is to rebuild my credit, however I do not want my taxes to be hit with a 1099 for the difference on the HELOC…not to mention any other of the credit I would negotiate a settlement with…or should I just ride it out. I’d rather owe the creditors than the IRS any day!
    I can’t get a straight answer so any guidance would be great.

    Thank you in advance.

    • http://www.Credit.com/ Gerri Detweiler

      Have you tried filling out the insolvency worksheet in IRS Publication 4681 to see if you would qualify for that exclusion if you settled now for what they are offering? That might help you in making your decision…

  • http://www.Credit.com/ Gerri Detweiler

    Karen – A tax professional wrote about 1099-A vs 1099-C here: http://www.returnthedeed.com/1099-a-vs-1099-c-2/. I think you will find it helpful. As for whether it is your principal residence, you are going to need to consult a tax professional. In fact, I would recommend you do that anyway because this is going to get complicated and now is the time to plan for it. If you don’t qualify for one of the exclusions, for example, and the resulting tax bill will be larger than you can afford, it may make sense to file for bankruptcy before the 1099-C is issued. I am not saying it will necessarily come to that but if you wait you may not have that option.

  • http://www.credit.com/ Credit.com Credit Experts

    Hi LB —
    It may be that you were not an actual employee during the probationary period. Is there a box checked on your 1099 that says “nonemployee compensation”? In general, income on 1099s has been paid before any taxes are taken out; those taxes (if any are due) will need to be paid. The income will be from “self-employment.” If you use an online program — and you can do so for free if you meet income requirements (annual income of less than $58,000) — you just plug in the numbers, and software does the rest. You can learn more here: http://www.irs.gov/uac/Free-File:-Do-Your-Federal-Taxes-for-Free

  • Daisy

    I just got in the mail a 1099C but I already filled my taxes. What can I do to report this now?

    • http://www.Credit.com/ Gerri Detweiler

      Daisy – I am not a tax professional, but my understanding is that you can either amend your tax return or wait until you get a notice from the IRS. If you owe money as a result of this form, however, penalties and interest will continue to accrue. Make sure you review Publication 4681 to see if you can avoid including some or all of this in your taxable income.

  • http://www.Credit.com/ Gerri Detweiler

    This is a very good question. The IRS website says:

    If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. For more details, see Exceptions and Exclusions, later.

    However it doesn’t exactly answer your question in a situation where you are not reducing principal.

    I suspect the 1099-C is wrong and you should fight it. As you may know from reading my articles, wrong 1099-Cs are a very common occurrence

    As for how to fight it, you can consult a tax professional. Daniel J Pilla also has a good discussion on how to do that in his book about taxes and debt forgiveness and he offers a 15-minute consult if you’ve read the book.

    I hope this helps! Please do let us know what you have learned. .

  • http://www.Credit.com/ Gerri Detweiler

    Cindy – I know these forms are a hassle and feel unfair, but your job now is to try to minimize your tax liability. Read IRS Publication 4681 to see if you qualify for an exclusion. You may qualify for either the Mortgage Forgiveness Debt Relief Act or insolvency exclusion.

  • Adam

    Freaking out here as well ….i received a 1099-c for over $40,000 from a short sale that our bank forgave and cancelled. Our realtor said not to worry about it as the IRS has been forgiving this for years under some Act. Ive been doing some research and it appears i need to submit with a 982 form to try and ask for forgiveness…is this a correct avenue, im so nervous that this could be included as income and i could be taxed, please, any advice would be great. Any one else used this on a 1099-c due to a short sale, and did it get forgiven? Going to hr block tonight to have them done.

    • Rosie

      Hello Adam, I’m in the same situation. Did HR Block help you?

  • Chris Lattier

    my wife is a stay at home housewife…she got a 1099c today and if I have to count this as taxable income…can I list her under the both spouses work tax credit? I mean…this is income, right?

    • http://www.Credit.com/ Gerri Detweiler

      It is considered income like any other earned income unless you can demonstrate that she qualifies for an exception or exclusion. If she qualifies for the insolvency exclusion for example then you fill out Form 982 to let the IRS know that. More in this article: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

  • http://www.Credit.com/ Gerri Detweiler

    Rick, Please read the article above carefully and if that doesn’t explain it, then try this one: What is a 1099-C? Your Top 11 Questions Answered

    It links to our numerous articles on this topic and will hopefully clarify things for you. In a nutshell you either need to include that amount in your income on your tax return, or see whether you qualify for an exclusion that would allow you to avoid paying taxes on it. (Or fight it if it’s too old.) All those topics are discussed in those articles. Hope they help.

  • http://www.Credit.com/ Gerri Detweiler

    Ryan – Because you have a low income you may be eligible for volunteer tax help. But you also may not need it. Des the amount of the 1099-C plus your unemployment put you above the threshold where you need to file a return? If not, then it may not be an issue. If you do need to file, then take a look at the insolvency worksheet in IRS Publication 4681. If you qualify for that exclusion then you can file Form 982 with your return and avoid paying taxes on that amount.

  • tinao

    I completed an insolvency worksheet & as I expected, I do qualify for being insolvent. Q1) Do I still list the 1099-C amount on my 1040 as “other income” and then just add the 982 form along with the filing? Do I also need to include the insolvency worksheet? The paperwork I have indicates “Keep for your records”.

    • http://www.Credit.com/ Gerri Detweiler

      Yes, here’s the example from the IRS in Publication 4681: “…Because the amount by which Greg was insolvent immediately before the cancellation was more than the amount of his debt canceled, Greg can exclude the entire $5,000 canceled debt from income. When completing his tax return, Greg checks the box on line 1b of Form 982 and enters $5,000 on line 2. Greg completes Part II to
      reduce his tax attributes as explained under Reduction of Tax Attributes, later. Greg does not include any of the $5,000 canceled debt on line 21 of his Form 1040. None of the canceled debt is included in his income.”

      Keep your worksheet in case the IRS challenges it.

  • http://www.Credit.com/ Gerri Detweiler

    Susan – I am so sorry to hear what you have been through. As I have mentioned to others in your situation, the easiest way to deal with this is to claim the insolvency exclusion if you qualify. Have you tried filling out the insolvency worksheet in Publication 4681? (Remember it is to be filled out right before the debt was discharged.)

    If you don’t then it sounds like a case could be made that they filed it too late. But you’re probably going to need to get help from a tax professional for that. You can try reaching out to the Taxpayer Advocate to see if they can help.

  • http://www.Credit.com/ Gerri Detweiler

    Bill – Have you read Publication 4681 and tried completing the insolvency worksheet? Remember to complete it based on your financial information right before the loan was discharged. If you qualify for the insolvency exclusion, you can file 982 and be done with it. If not, you’ll need to talk with a tax professional with experience in these forms to determine whether filing separately would help.

  • http://www.Credit.com/ Gerri Detweiler

    Great question. A 1099-C doesn’t affect your credit score.

    And I assume you mean after you receive it, not after you file it unless you are a creditor.

  • http://www.Credit.com/ Gerri Detweiler

    Peter – They don’t take taxes out of it. As I explain in my stories, the IRS will get a copy of this form and assume it is taxable income to you unless you can show otherwise. I explain how you may be able to avoid paying taxes on this “income” in this article:

    1099-C In the Mail? How to Avoid Taxes on Cancelled Debt

  • Mrs. Liver

    Please help!! My husband just received a 1099-c yesterday for 2012. One of his friend had his mail and just now gave it to him. Now we’re trying to fill out the insolvency worksheet and amend taxes. This was a car loan debt before we got married. The car was repo.The 1099c is dated for Oct 2012 which is 5 months after we married. I’m confused about the insolvency worksheet bc the house mortgage and deed is all in my name and 2012 we file our taxes jointly. Even the car loan is in my name. Do we add the mortgage as a liability and a assets? What about my retirement, should I add my retirement as a asset too? Thank so much for taking my question. Honestly I’m scared this amount is way more than what we have. We live in North Carlina.Thanks again

    • http://www.Credit.com/ Gerri Detweiler

      I wish I had a specific answer for you; unfortunately, the IRS has not made it easy to understand how to handle some of these less straightforward situations. I wrote a piece about spouses and 1099c’s that may help answer your question. If it doesn’t, and reading Publication 4681 doesn’t clarify it I suggest you talk with a tax professional who understands these forms.

      Form 982: The Way to Battle a 1099-C

      Finally, if you do find this process onerous, I would suggest you file a complaint with the Taxpayer Advocate.

  • http://www.Credit.com/ Gerri Detweiler

    Teresa – I am not a tax professional and these things can get quite complicated so I strongly recommend you talk with a tax professional now to make sure you protect yourself.

    Having said that, there are two main exclusions that taxpayers use to avoid paying taxes on cancelled debt. These were discussed in the article: the bankruptcy exclusion and the insolvency exclusion. The bankruptcy exclusion applies to debt discharged in bankruptcy. If your mortgage debt was included (you can ask your attorney) then you should be able to claim the bankruptcy exclusion if you receive a 1099-C. You can claim the insolvency exclusion if you quality. You’ll find a worksheet in IRS Publication 4681.

    As for your liability for any deficiency, that depends on the terms of your bankruptcy and/or your short sale. State law may also come into play. Please make sure you get professional legal advice before you sign these papers so you know the answers to these very important questions.

  • http://www.Credit.com/ Gerri Detweiler

    The IRS publishes information about when court awards are considered taxable. You will find that information here: http://www.irs.gov/publications/p525/ar02.html If you still have questions, we’ll have to suggest you consult a tax professional or talk with the IRS.

  • http://www.Credit.com/ Gerri Detweiler

    My understanding is that you can include the single amount if you are filing jointly. You don’t have to double the cancelled amount! I’d suggest you try to slog through Publication 4681 and if that doesn’t answer your questions, talk with a tax professional who understands these forms. I know it can be very confusing!

  • Stephanie

    To calculate insolvency, do I include the amount on the 1099-C as part of my liabilities since I’m calculating liabilities and assets the day before it was written off?

    • http://www.Credit.com/ Gerri Detweiler

      You calculate insolvency immediately before the debt was written off, so you include the full amount of the debt. If you look at the insolvency worksheet in Publication 4681 it says: Part I. Total liabilities immediately before the cancellation (do not include the same liability in more than one category)

  • Danielle

    I had a HELOC that was recently forgiven.I received the 1099-C and added it as income on my taxes. I recently did my annual credit check and it is still showing up on my credit report.Can I dispute it since it was forgiven? Or do I have to wait the 7 years for it to fall off of my report?

    • http://www.credit.com/ Credit.com Credit Experts

      Unfortunately, just because the debt was forgiven, it doesn’t wipe the record of the debt going bad. The recorded incident of the HELOC going bad (or unpaid, until it was forgiven) will remain in your credit reports for seven years.

  • http://www.credit.com/ Credit.com Credit Experts

    Debbie — In 2005 the bankruptcy laws were amended so that private student loans were treated like federal student loans in that they could not be included in bankruptcy. In your case, I’m assuming the student loans were private student loans (prior to 2005, private student loans were allowed to be included in bankruptcy). If this is the case and the bankruptcy was filed prior to 2005 — and the private student loans were included in the bankruptcy, the collector doesn’t legally have a right to collect the debt. If they don’t have a right to collect the debt, you can send them written notification that the debt was included in bankruptcy in 1996 and you do not owe the debt. If they continue to try and collect on a debt that was included in bankruptcy they’d be breaking the laws under the Fair Debt Collection Practices Act. In which case, you may want to contact a consumer law attorney to see if you might have a case against the collector. To find a consumer law attorney in your area http://www.NACA.net is a good place to start.

  • ChefC

    I have a condo in Tampa FL that I paid 150K and it is now worth 80K. The realtor told me that I can do a short sale and the IRS would send me a 1099 form for a credit for the amount. Is there a way my tax accountant can write this off or is there a “tax code or law” that he can add to my tax form whereas I won’t have to pay this money? The property is in Florida and I live in Philadelphia and it is an investment property.

    • http://www.credit.com/ Credit.com Credit Experts

      Because it’s an investment property and you’re taking a loss on the investment, you may be able to take a deduction there — but this is really a question that would be best answered by a tax professional. We’d encourage you to talk to your tax advisor to see if this is even possible.

  • Theresa

    Short story is: Husband and I get Operation Farm loan in 1996. 2001 final divorce decree. He files bankruptcy, I go get a good job and manage with out filing bankruptcy. He lost the farm and everything that went with it. He had, after we separated, purchased a farm getting new loan. In bankruptcy court they restructure and make OLD loan liable by me again! How does that happen? How can that happen? If I wasn’t even there!!!(learned this happened in 2004) I told FHA I didn’t know what they were talking about to prove it. I got nothing. Anyway, fast forward to 2012 April 17th I get a 1099-C no code stating I owe 56K plus 15K interest/penalties for the year 2012??????? Well gee, if I had gotten something back in the day, say like 2002 TEN YEARS AGO, maybe this could have been taken care of. Now what am I suppose to do? Pay for something my ex lost!! I in no way GAINED anything from all this. So why should I pay taxes on this debt?

    • Gerri Detweiler

      Theresa – When your husband filed for bankruptcy that did not let you off the hook for that debt that you cosigned. If anything, it made the situation worse for you because it left you liable for the entire balance.

      However, what they were allowed to do as far as restructuring it I can’t say. It does sound like this is a federally guaranteed loan, though, and generally the government allows additional avenues for collection for loans they have guaranteed. I’d suggest you do two things:

      1. Consult a bankruptcy attorney to find out whether what the lender did was legal.

      2. Consult a tax attorney to find out how to challenge the 1099-c. It sounds like it should have been filed much earlier, as you say, when you could have demonstrated insolvency.

      (The fact that you gained nothing is irrelevant as far as the IRS is concerned.)

  • jennifer

    hmmm….I still need help. I settled two credit card debts last year and have received two 1099c’s one at 817.66 and another at 795.72. I was did not work last year so the only thing I have to deal with are these two 1099c’s. So I’m confused if I can file an exclusion or exemption? I’m so confused.
    Thank you for your help,

    • peg

      per my talk with an irs rep, your situation is the same in that you do not have enough to even have a filing responsibility (needs to be $3800+) so you shouldn’t have to do anything with it, and have lucked out on this mess these collectors are causing.

    • Gerri Detweiler

      Jennifer – If you did not have any other income last year then it’s possible you don’t have to file. I’d suggest you fill out a Form 1040 with these amounts as your income to see what happens. I am not a tax professional, though, so please don’t take this as tax advice.

  • Mike S

    I closed on a short sale with Chase on December 31st. I expect to claim the debt income on my 2012 taxes, but Chase has not sent me a 1099-c. They are claiming I will get it in 2014 for my 2013 taxes. But my closing date and date of transfer and HUD statement are December 31st. What should I do? I want to claim this in 2012 for several reasons.

    • Credit.com

      Mike – If the closing date was December 31st, the sale still technically occurred in 2012. The deadline for mailing out tax forms is January 31st which still gave them a month to process and mail out the form. Have you contacted a tax professional or a tax attorney? In this case, that would be your best bet. Unfortunately, we’d love to help but some questions are out of our realm of expertise and best answered by someone that knows the laws and your options.

  • Nelson

    I recived a 1099c over 70,312 that was lowered from my loan as I participated in the making home affordable program I was lucky enough that I didnt lose my House but BOA is now making it seem as they gave me that money. In all reality the Home I purchased was at a inflated price and the Modified my loan and the value of my home to match the cureent market value in my area. After reviewing my income and the 70k that BOA has tagged on it makes it seem that I made over 140k in salary last year as to which I must pay the IRS Back 18k. I didnt ask them to lower my home value I wanted to just make my mortgage payments more reasonable and in the exemptions it shows making home affordable pay performce are not taxable but im unsure if this is the same thing.

    • Gerri Detweiler

      I know it seems nuts doesn’t it? Have you tried to find out whether you qualify for the Mortgage Forgiveness Debt Relief Act or the insolvency exclusion? If so then you may be able to avoid paying taxes on some or all of that “income.” Let us know what happens.

  • Robin

    Thank you for so much great information. I have been reading for hours but haven’t heard of anyone similar to my probelm. I too have rec’d my 1099c’s. One is for a piece of land I purchased prior to marriage and the other is for a house that was primary residence up until 2 years ago. I do not have any income and haven’t for over 5 years. Can I file insolvency on the 1099C’s (which are just in my name) and file married jointly without them taking his assesst into consideration? OR should we file separately?

  • Darwin

    Half of a student loan was charged-off and the other half was paid by the co-signer. Both the signer and co-signer received a 1099-C for the full amount that was charged off. The signer qualifies to exclude the full amount from income due to insolvency. Is the co-signer required to claim the amount as income (or prove insolvency themselves) in this situation?
    Must the co-signer pay the tax on the amount that was charged off if the signer excludes it due to insolvency?

  • Darwin

    Half of a student loan was charged-off and the other half was paid by the co-signer. Both the signer and co-signer received a 1099-C for the full amount that was charged off. The signer qualifies to exclude the full amount from income due to insolvency. Is the co-signer required to claim the full amount as income (or try to prove insolvency themselves) in this situation?
    Must the co-signer pay the tax on the amount that was charged off if the signer excludes it due to insolvency or is the fact that it is reported on the signer’s return sufficient?

  • david

    Had a deed in lieu on my primary residence last year, never recieved a 1099c, how do i get this information, i have filed already, because i didnt know what to do. Thanks in advanve dave

    • Gerri Detweiler

      David – Have you talked with the lender to ask them about the 1099-C? What did they say?

  • Tom

    I received a 1099c on my foreclosure property. After foreclosed the property was bought by the bank for exactly what I owed. I was told the debt was forgiven over the phone…is this true? The form lists the amount of debt discharged…the box for debtor being liable is not checked…interest if included $0.00…fair market value of the property $0.00.

    Will I have to pay taxes on this?

    • Tom

      When I said the debt over the phone was forgiven what I meant was that the bank bought the property for what we owed on it….after that transpired I was told it meant the debt was forgiven. Is that true?

    • Gerri Detweiler

      Tom – What does it say in box 2 amount of debt discharged?

  • Dorothy Minix

    I received a 1099 on my deceased mother’s estate. I was the executor. Do I file a return for last year (form is 2012) in my mother’s name listing this as income? Thank you.

    • Gerri Detweiler

      Dorothy –

      Our condolences for your loss. I checked with Edward Zollars CPA, and he said: “If the debt was cancelled for a deceased person, the income is technically income of the person’s estate since the debt passed to the estate on the decedent’s death. It would be reported on a Form 1041 for the estate. The estate would be able to avail itself of the various exclusions (such as for an insolvent estate) but otherwise would have taxable income.”

      You may also want to read the answer to the question from Barbara in California – which is similar – in the comment section of this story: What To Do If You Get A 1099-C For An Old Debt

  • Jules

    I received a 1099-C for my S Corp that was closed a couple year ago. How do I report this?

    • Gerri Detweiler

      Jules – I’ll have to suggest you talk with the tax professional who filled out your last return for the S Corp, or if you didn’t use one, to find one who can help you. This isn’t a topic I’ve researched.

  • Andy

    I included an overpayment to unemployment in my chapter 7 bankruptcy. The state of Illinois included the discharged amount in my 1099-g. Should I consider the discharged amount as “paid back” and include it to a form 982?

    Your help is appreciated

    • Gerri Detweiler

      Andy – I am sorry but I don’t know how 1099-g’s are handled. I’ll have to suggest you call the IRS or talk with a tax professional.

  • Cindy

    My husband and I had a foreclosure in April 2011. We have not received a 1099-C, however we do have a document entitled “Trustee’s Deed Upon Sale” (that we received on line from the County Office – not sent to us directly) that references “Affidavit of Value Exempt Pursuant to A.R.S. Section 11-1134 (b) (1).
    This property was eventually sold – for less than the mortgage. However, at the bottom of the page it states in bold “THIS OFFICE IS ATTEMPTING TO COLLECT A DEBT AND ANY INFORMATION OBTAINED WILL BE USED FOR THAT PURPOSE.” I am thinking this is standard statement at the end of these types of documents? Does the A.R.S. exemption mean we qualified for the Mortgage Debt Relief Act? Any information would be appreciated.

    • Gerri Detweiler

      You may have not received a 1099-C yet because there may not have been an identifying event that requires them to send the form. In other words if the lender is still trying to collect a deficiency then they may not have concluded that they are required to send the 1099-C form. I don’t know what an A.R.S. exemption is – is that something to do with the County? If so, it may not have a bearing on whether you will possibly owe federal income taxes on cancelled debt since the exemptions apply to federal taxes. To figure out whether you may qualify for the exemption under the Mortgage Debt Forgiveness Tax Relief Act refer to IRS publication 4681. The qualifications for that exclusion are in those instructions. If you’re still not sure, I’d encourage you to meet with a tax professional with experience in these forms. If you get a 1099-C a few years down the road, it may be harder for you to recreate the records you may need to qualify for one of the exclusions.

    • Gerri Detweiler

      Cindy – I believe that has to do with the recording of the deed in Arizona. As far as I know it has nothing to do with the tax issue. But I am not a tax professional. And yes, the collection statement is standard. To figure out whether you qualify for As to whether you qualify for the Mortgage Forgiveness Debt Relief Act, you need to read publication 4681 which describes that exclusion. Hope it helps!

  • Matt S

    I had a Chapter 7 bankruptcy discharged in 2002, and today received a 1099-C from one of the creditors. I understand from what I’ve read that I won’t owe taxes on the amount, but I’ve already e-filed. Do I need to do an amended return to pick this up, and is there some point past which I won’t have to worry about other creditors from 2002 suddenly deciding it’s time to get around to clearing their books?

    • Gerri Detweiler

      Matt – That is just ridiculous! It’s too old for one thing and not even necessary for another. Who is the creditor? If I were you. I would ask the creditor to send a corrected 1099-C with a $0 amount. If they do, then the IRS will get that and you won’t have to deal with it. But if not, then call the IRS, explain what happened, tell them that this debt was discharged in bankruptcy ten years ago and ask them what to do. We’ve had a few readers get cooperative IRS agents who took care of it over the phone for them so they didn’t have to refile. And please be sure to file a complaint about this creditor with the Consumer Financial Protection Bureau.

      • Matt S

        The creditor was a Visa from First Citizens Bank. I spoke with one of their collections people, who was able to confirm that it was indeed the account from 10 years ago. He indicated that they were not issuing any new documents, though, so no correcting the 1099-C. I’ve made a couple of efforts to contact the IRS, but so far without a response. I have the necessary forms, so I’m just going to go ahead and file the amended return.

        Also, the FCB contact indicated that the 1099-C was generated automatically when the old account was cleared, so it was clear to me that there isn’t any human processing at work there. They likely issued hundreds or thousands of these things this year, apparently with no concern as to the actual circumstances of the discharge.

        Thanks for your advice, it was very helpful to see that I’m not the only one having this sort of problem.

        • Gerri Detweiler

          Matt –

          I encourage you to file a complaint against the creditor with the Taxpayer Advocate and the Consumer Financial Protection Bureau. There’s really no excuse for a creditor to send these forms out ten years after the fact on debts discharged in bankruptcy.

  • Pingback: Form 982: The Way to Battle a 1099-C - Debt Relief BureauDebt Relief Bureau()

  • dave

    I received a 1099-c for a cancellation of debt of $90,000 from my lender for a short sale on a rental propety that I sold in 2012. I purchased the property in 2006 for $350,000. I put $70,000 down. My mortgage was $280,000. I sold the property for $185,000. My depreciation is $80,000. I am confused as to where the cancellation of debt goes on my 1040 and how I deduct my losses from the sale. Do I use Schedule C? Schedule D? schedule E? form 4797? 1040 line 21? Thanks for your help!!

  • larry

    I have settled 3 credit card debts in 2012. The Credit card companies will not send me a 1099C. Can I estimate this amount on my taxes? I have filled out the appropriate forms for insolvency, with the aproximate figures.

    • Gerri Detweiler

      The IRS does say that you must report cancelled debt if they don’t send you a 1099-C. Your strategy sounds like a reasonable one, though if they send you a 1099-C next year for a different amount that will create some additional work for you. I’d suggest you call the IRS and ask them what do to. Will you let us know what they say?

  • Adriane

    I am freaking out like some of these other people. My husband is disabled and we fought to get his loans discarged. i got the 1099-c in the mail saying 40 some thousand was discharged and I’m now reading this is counted as income. We own nothing other then two older model cars. I wait tables, we cannot pay any kind of tax like this. How do I know if I qualify for the 982?

    • http://www.Credit.com/ Gerri Detweiler

      Adriane – You may qualify for the insolvency exclusion. Fill out the worksheet in Publication 4681 to see if you do.

  • Voncile

    I let my sister inlaw borrow $2000 back in 2004. I’ve been trying to get her to pay me back ever since. Can I complete a 1099-C against that debt or is it too late?

    • Gerri Detweiler

      If you read the instructions for 1099-C forms it doesn’t cover this kind of situation exactly. (At least you aren’t required to file a 1099-C from what I gather.) And you’ll also see that if you do want to file a 1099-C then it’s likely that you should have done that several years ago.

      I am not sure why you want to file this form. It won’t help you collect – unless it somehow scares her into paying you but that may be a stretch. It may turn out that she owes the IRS more money as a result of you filing the form, and that leaves her with less money to perhaps someday pay you.

      Have you thought about taking her to small claims court instead? It may be too late for that, too, based on the statute of limitations in your state, but it may be more effective than going the 1099-C route.

  • Margaret W

    My husband & I received a 1099-C on a debt from a company that did not submit the paperwork during our bankruptcy. We are awaiting the final discharge papers for the bankruptcy and this company was one of the couple that did not respond to any letters that were sent to them when we filed in 2007. There were a couple companies that never submitted the correct paperwork to the lawyers or the trustee. They were notified numerous times and never responded.

    Now we get the 1099-C and are now sure if we should claim it as income or use the Form 982. Do we have to claim it as income since they failed to respond during the five years of our bankruptcy?

  • Nicole

    Who can help,

    I purchased a time share for $7000.00 which I no longer can afford after a seperation from my ex. Since this happen payments had been stopped and the company whom the sold me the timeshare has been calling weekly for payment. Unfortunately, I was not able to make any payments.

    At this point, I want this to go away. The company stated that they will closeout this account for $1500.00 and end my contract. I intially thought this was a great idea until I came across the company ability to file a 1099-C Form against me. Please let me know how damaging this could be. Do I deal with the IRS or continue to let the be a red flag on my credit report in hopes it goes away in 7 years. Any valuable information will help.

    • Gerri Detweiler

      Nicole – A 1099-c does not affect your credit. It sounds like this account has already been turned over to collections so the damage to your credit is already done. (You can check your credit reports for free at AnnualCreditReport.com and you can check your credit score for free at Credit.com.) Settling a collection account doesn’t make the collection account on your credit any worse. So if that’s what you need to do to put it behind you, then go for it.

      As far as the 1099-C goes though, they may report the debt they cancelled to the IRS on a 1099-C and you will have to include that amount in your taxable income. Be sure you keep documentation of what you owe and what they settled for in case they report it incorrectly. You may be able to avoid paying taxes on that amount if you qualify for the insolvency exclusion. I explain how that works here: 1099-C In the Mail? How to Avoid Taxes on Cancelled Debt.

      I know this can be stressful, but think about it this way (a hypothetical situation): If the collection agency cancels $5500 in debt and you must add that amount to your income, then you’ll pay taxes on that amount at your tax rate. Let’s say your tax rate is 15%. If so, $5500 x 15% = $825. You’d have to pay the IRS $825. You still have come out $4675 ahead ($5500 – 825) and you’ve put this behind you.

      Of course this is a simplified example and your situation depends on other factors. I’d suggest you consult a tax advisor if you need help making a decision about how to handle this.

  • Eileen


    I am about ready for a heart attack. I cannot read anymore, because I am getting myself more confused. I am going to ask you what you think! I will also try and make this short and simple….try…

    We bought a house in November 2012. I had an old dept on my credit report…a repo from almost ten years ago. No excuses…it is what it is…could not afford it. My balance due showed 11680. I ad to get this taken care of for them to let us purchase the house, so we agreed to pay 6000 to cover it and forgive the loan. My husband and I did this.

    Today I get a form 1099-c….and I have been having a nervous breakdown since! On the form it says for #2 amt of debt discharged 11680. #5 is not checked.

    First of all…amount of debt discharged….which is box #2 is not correct, because we paid 6000 of it….am I reading this correctly? That would mean a balance of 5680 was discharged…correct?

    And….this was so long ago, but no way in heck could I afford this at the time and it was stupid of me to do it. I have to pay taxes on the balance?

    I am just trying to figure this out…any thoughts/comments would be much appreciated…at this point, we will owe money to the irs….ugghghhhh…

  • Gwendolyn

    For the above 2012 1099-c I forgot to tell you that Block 5. is checked and yes I am the debtor and responsible for the repayment of debt of the mortgage.

  • Gwendolyn

    In 2012, I owed $95,542.48 on my house. I short saled my house, June 2012 for $61,500.00.

    Now on my 1099-C that GMAC sent me On line 2. for Amont of Debt Discharged is $95,542.48.

    On line 7 Fair market Value of Property is $0.00. Under debt disciption is Mortgage.

    Since I sold my house for $61,500.00 should line 2. Be the diffrence between what was owed and what the house sold for? Which by the way was approved through GMAC. So Line 2 should be $95,542.48- $61,500.00 =$34,042.48. Line 2 should be $34,042.48 correct. When I called GMAC about this they said I had to talk to the IRS about this????? What the form that they issued is wrong and should be corrected. Who do I report this to? I also informed GMAC that they are saying they didn’t recieve any money on the sale. Am I correct on this and how can I get this fixed, so I can get my taxes completed?

  • Lynn

    Today I received a 1099-c from a company that cleaned my carpets. They were paid by my insurance company and tried to overcharge us an additional $500.00. Finally they said we were correct and did not owe this extra charge. So when I received my mail it had a 1099-c made out to my husband for $550.00. No SSN or anything other than our address. This has to be illegal so what should I do. Please help.

  • Lola

    I got a 1099A for my foreclosed primary residence here in Calif. I called the IRS TWICE. Both difft agents I spoke with informed me, that according to my situation and what was listed on my particular 1099A form – I WOULD NOT have to file it with my taxes. They did both advise me to keep the form for 3 years though. Also in Box 5 (personal liability for repayment) NOT checked on my form.

  • Jcb

    Hi Gerri ,good morning … Bank of America forgive my second mortgage loan. Im aware that i will recive 1099 .. But until now i still have not receive it yet. So i decided to call Bank of america to ask when i will receive the 1099 they ask me if i had previous BK which i did yr 2011 and has been dischaged .. She said i wont receive 1099 because they did not report those as my income … Are those possible? ..can i file my income tax now? Am i gonna have a problem later? Am sorry coz a bit scared what going to happen next ..just need your advice thanks..

    • Gerri Detweiler

      It’s not clear to me from your question whether that second mortgage was discharged in your bankruptcy. Was it? If that’s the case then the bank is not required to send a 1099-C and they probably won’t. If they do, you can simply file Form 982 to indicate you qualify for the bankruptcy exclusion. But if you did not discharge the second mortgage in bankruptcy, then thy are required to file the form. Can you clarify?

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  • Louis

    Hello Gerri, first off, thank you for a great website and blog information, God bless you. Also, I had a second mortgage line of credit which was with WAMU over 5 years ago in florida, now Chase has sent a 1099 on the debt which is over $69,000. My understanding is that first, they have no standing, no proof of the original note, they are not the institution which the alleged debt was originated, and the statute of limitations of last activity was over 5 years ago. Not only that, but they are clearly falsely reporting debt on my credit without proving they are the holders and have standing to even collect much less do they have the power to proceed and 1099-me. What other suggestions might you have that will help as I will send a debt validation and other items via certified mail and inform the IRS of this false income claim. Thanks!

  • Kathy Burtram

    I just received a 1099 from a bank I have never done business with for a debt that I am almost 100% positive that I paid taxes on last year as part of a charge off stiuation. What do I do with this and how do I prove that I have already dealt with this? And how do I find out what this debt is for? Thanks.

    • Gerri Detweiler

      Kathy – I wish I had a simple answer for you! I’d start with the bank that issued the 1099-C. Call them and try to get an explanation. As far as your return goes, you have to address it or the IRS will contact you about the discrepancy. Of course there is no form for doing so. I wrote about that in this article: Tax Help: How to Dispute A 1099-C Form

  • Michelle

    My husband and I did a VA Compromise (short Sale but VA pays the remaining balance and deducts the amount paid from my entiliments towards a new home) We recieved a 1099c for $29,000. The balance is paid off completely not forgiving how do I get the IRS to understand this. I called them and they say they understand what I am talking about and need to so research to determine if a corrected 1099c is warranted.

    • Gerri Detweiler

      I wish I knew what to tell you. You may end up having to get a tax professional to help you if you can’t navigate it on your own. I wrote more about disputing a 1099-c here.

  • Marc

    My wife and I are trying to purchase a house. We decided to take what money we had and call our creditors to get our debts settled. A few of which were the kind that we paid them up to a date (paying off the original debt and most of the interest, then becoming delinquent because of loss of job near the end accruing enough interest to go back to 5k over the original debt, you know the story). We already did our taxes this year and all of a sudden we start getting these 1099c’s. First they should have been here by now. Second how do they justify saying that a debt cancellation is earned income? I worked hard to get enough to agree to to a settlement. Now they expect me to pay taxes on these numbers as though I earned it working? It seams like a last way to stick it to you after taking thousands in interest and the original loan, and screwing you one last way.

    • Gerri Detweiler

      Frustrating probably doesn’t describe it for you! I wrote a bit more about why they consider it income in this piece, What is a 1099-C? Your Top 11 Questions Answered, but when “income” is reported for cancelled interest and fees, it’s harder to justify.

  • Rick

    I current tax code is getting so confusing that it is going to put this country into a spiral down drain of grief for everyone. And it needs to be fixed immediately. because is killing a lot of people with there high interest and penalty’s with no way of getting out from under. Just so the government can piss it away because they do know how to spend it better than us. Just look at are national debt. Its is out of control and we the people have to pay for there fouled up ideas and tax codes just because they can because they given themselves that right regardless what the people that voted them in there say. This is not kosher and as Americans we do not have to keep putting up with it. Vote them out and gain control before it is too late for all of us.

  • Mike

    I filed my 1099c form in the federal section. Do I need to file in the state section.

    • Gerri Detweiler

      Mike – I assume you are wondering if this is taxable income on your state tax return and if there are ways to avoid paying state income taxes on it? I am going to have to suggest you consult a tax professional or your state department of revenue (or the agency that handles state taxes) as I simply don’t know the answer for each state.

  • jess

    Hi Gerri,

    I received a 1099C for overdraft on a BOFA account when in fact they lost over 3k of my money. They had agreed I made the deposit and put the money into my account because they had record of the deposit but they lost it before it posted. I had closed the account (who wants to do business with banks that lose your money and make you go through hell to track it down?) I never heard anything about it or any problem as it was resolved that THEY had lost my money. Now I am supposed to claim taxes on income I had already paid taxes on because they are trying to write off money that they lose?? I’m not sure how to proceed, Incorrect reporting on a situation where they were in the wrong and that they don’t want to fix doesn’t look like an easy check mark on the irs forms.

  • Alexis

    Hay Gerri,

    I received a 1099-c on a debt from 2003 that I settled in 2012. should I receive a 1099-C on a debt that I paid?

    • Gerri Detweiler


      If the creditor wrote off or cancelled $600 or more of your debt then they are required by the IRS to file a 1099-c showing the amount they cancelled. You may want to read my other story that explains why cancelled debt is taxable.

  • diana

    Dear person
    I recd 1099-C and yes I am about to have a cardiac attack….but I will breath slowly…help:

    my home was foreclosed in 2011, we had two mortgages. I rec’d the 1099C for my second mortgage.
    Questions: Why dont they list on box 6 that this was a foreclosed property,
    2nd q: why was this not reported in 2011?


  • Patty

    I received a 1099-A for a foreclosure on my primary residence in 2012. Box is not marked for personal liability and the court had ruled no deficiency judgment would be taken as i had recently been adjudged bankrupt(though the house was not included in the bankruptcy and was foreclosed on later.) I have not received a 1099-C. Should i wait for the 1099-C that is sure to come? and exactly how do i report this (box 2/balance 61,398.27 box 4/FMV 13,334.00)

    • Gerri Detweiler

      Patty – You may or may not get a 1099-c, and the amount may turn out to be different. It’s hard to say exactly what will happen as you’ll note from all the comments and stories we’ve received on this topic. The simplest way to approach this is to qualify for the exclusion under the Mortgage Debt Forgiveness Tax Relief Act. If you qualify for that exclusion then you can claim it. The IRS says you are supposed to report cancelled debt whether or not you get a 1099-c.

      It wounds like there is a substantial amount of money involved here so if you can’t make it through Form 982 (publication 4681 has instructions for you) yourself, then I’d suggest springing for help from a tax professional. It may be well worth it if it helps you avoid a run-in with the IRS.

  • Jenn Saunders

    What about a foreclosure? We received a 1099-C today from our mortgage company.
    Any advice on how to handle this ? And too late, my husband and I have already
    freaked out.

    • Gerri Detweiler

      Jenn –

      I suggest you read my most recent article on this topic. It should give you an overview of how this works and there are links to other stories with more details. (And I can understand why you’d have that reaction. I would too!)

      What is a 1099-C? Your Top 11 Questions Answered

  • Deanna Reed

    Hello.. I received a 1099-C yesterday for an Auto Loan.. it is 11 years old. The truck was in my name and my ex husband got it in a divorce. It got re-poed after about 3 years. Now they want me to pay $12,852.00.. on my income?? what should I do ? I live in Texas, I have divorce papers saying he got that truck in divorce.. Thanks for your help, Deanna

    • Deanna Reed

      I just called the credit people and they said my ex was sent the same paper. How can we both have to pay $12, 852.00 Also I think they sold that truck and only like $3000.00 was owed on it? Thank you Deanna

      • Gerri Detweiler

        Deanna –

        You don’t both have to pay taxes on the same cancelled debt. However, given the fact that this is a fairly complicated situation – due to the age of the debt as well as questions over who must pay it – I believe you are going to need to meet with a tax professional with expertise in these forms. Please make sure you choose someone who knows what they are doing as this can be tricky .

        I also suggest you read my article: What To Do If You Get A 1099-C For An Old Debt.

  • Fran

    I have a different situation. Part of my credit card debt was canceled in 2011. Even though I did not received a 1099 C I claimed the amount on last year’s tax return. Low and behold I just received a 1099 C and the amount was for about $2700 less than what I claimed. I am assuming that I do not have to do anything this year and I should amend my return for last year?

    • Gerri Detweiler

      Fran –

      You don’t want to just ignore it this year because the IRS will assume it’s correct for this year and will expect you to include it in your income unless you demonstrate otherwise. I am not aware of a form that you can use to indicate you already included it in last year’s income, so my understanding is you’ll have to provide an explanation with your return. A tax professional can give you more details.

      As for last year’s return, if you believe you included too large an amount of cancelled debt then my understanding is that you will need to amend your return. But I am a credit expert, not a tax professional, so make sure you get professional assistance if you need it.

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  • http://Credit.comNews&Advise Rich

    Me & my wife file for Chapter 7 bankruptcy in 2012. 6 personal & 4 business credit cards where all discharge, but Capital one business card sent me a 1099-C on line 2 for a amount of $16,332 line 5 had a check in the box and line 6 event code was (A) I do not know what this means, Is capital one saying I am responseable for that amount since this was a personal bankruptcy not a business. I am a sole proprietor carpentar when I file for bankruptcy…..Please help us…….thank you…

  • http://ccomwp.wpengine.com/2012/02/just-received-a-1099-c-dont-freak-out/ Steve

    Hi Gerri,
    I just wanted to thank you for your great blog. We filed chapter 7 in 2010 and just received a 1099C today right after we got back from doing our taxes! (fortunately they were not filed yet and they put them on hold) I searched several websites and found the same answers.. Having peoples testimonials and you answering them for us just put the icing on the cake. Thank you for helping us not freak out!

    • Gerri Detweiler


      You made my day! I feel like there are more questions than answers on this topic. So glad you found this helpful.

  • Cindy H

    My mom just received a 1099 C for a car that was repossessed in 2007. The 1099 says 2011 but she is just now receiving it. The statute of limitations would have been up in 2011. Can they do that? Does she have to claim it on her taxes this year?

    • Gerri Detweiler

      I wrote about the issue of 1099-Cs for old debts here: What to Do If You Get a 1099-C for an Old Debt. In this case, the debt isn’t that old so if there was collection activity after 2007 it’s possible that the 1099-C is within IRS guidelines.

      My understanding is that if this form was filed for the 2011 tax year and she did not include it then she must amend her tax return for that year. The IRS likely received a copy of this form from the lender and will assume it is taxable income (for 2011) unless she demonstrates otherwise. She may get a notice from the IRS that she owes money if she failed to include it and it changed the amount of tax that would have been due for that year.

      Also, she can take a look at Form 982 and see if she can determine whether she qualified for an exclusion that year. If she was insolvent by IRS definition, for example, she could file an amended return with Form 982 to show why she does not owe taxes on the cancelled amount.

      Please keep in mind I am not a tax professional Cindy, so please make sure she gets professional advice.

      • Cindy H

        Does collection activity mean that they collected something from my mom? They have not collected any payment since 2007. How can we tell if they filed that 1099 in 2011? Thanks for your advice.

        • Gerri Detweiler

          Cindy – Your mom can call the IRS at 800-829-1040 and request a wage and Income transcript for the year in question. It should show if a 1099-C was filed. But if she got it, they most likely did. It would be unusual for them to send the 1099-c to the taxpayer but not to the IRS.

          I suggest you read my articles about 1099-C’s for old debts. It does into this in more detail. Your mom may need to consult a tax professional with experience in these forms if she doesn’t feel comfortable navigating this on her own.

  • Don

    What should I do if I received a letter from the IRS stating a previous creditor filed a 1099-C against me but I never received one from the lender? Also, the date on the IRS’ letter states the 1099-C was reported on 3/4/2011. Isn’t that past the date when the lender has to send it out for it to be applied to that year’s taxes?

    Need an answer soon! Anybody?

    • Gerri Detweiler

      Don – My understanding is that the fact that you didn’t receive a 1099-C doesn’t mean you can’t be held responsible for taxes on that debt. You now need to figure out whether you qualify for an exclusion or exception that allows you to avoid paying taxes on some or all of that debt. If you don’t think the 1099-C is valid or correct, then you’ll have to contact the lender to try to get them to issue a corrected one.

      You may need a tax professional with experience in these issues to help you if you can’t navigate it yourself.

  • Chris

    I had a creditor who bought a charged off credit card debt. From over 10 years ago. Can they send me a 1099 for an unpaid credit card from 1999 ? Or is this just a threat?

  • Mark

    Great info here on a subject that has created a nightmare. I’m one of those with zombie debt that never seems to die. I’m also dealing with a collection agency that has tried to get a payment for a debt nearing 10 years since any payment activity by threatening to file a 1099c. They went as far as saying immediately the irs will put a lien on my home. Garnish my wages. Basically destroy my life forever. It’s a bit hard to get these fools recorded saying this stuff over the phone to provide any proof but I have still filed complaints to both my AG and the states AG in which the business is located to have them investigated over this issue. I’m actually someone who has endured years of harassment for out of statute debt. This whole 1099c is very new to me but I’m learning fast to be prepared just in case.

    Geri I have a question…

    • Gerri Detweiler

      I have moved Mark’s question over to the Credit.com forums where we discuss it in more detail. Read the question and the answer there.

  • Linda

    Geri, October 11, 2012 10:16 am

    My husband and I have been in a short sale since Jan 2012, I have not paid the mortgage since Sept, 2011. I tried to get a loan modification which took a year with back and forth from Bank of America which every 3 months I had to send all the information again, they always said well I have the acount now. Well I never got the mod, my husband got ill, could not take it any more so started a short sale, sold our home and like I said it has been over 7 months, buyer cold not get funded, got a new lender , appraiser came out on Friday, I got a letter in the mail from bof saying we have approved your home equity account for partipation in a principal forgiveness program as a result of the department of Justice and State Attorneys General national settlement with major mortgage servicers, including boa. Now what, my relator says we are not a short sale any more, I can gain some money from the sale, but what about the tax now, some say I will have to pay tax on the 151,000 they are forgiving. I have30 days to let them know If I dont want it. Would we be better off not taking it? We would not have enough money after the sale to pay the tax. Some say I wont owe the tax. What about capital gains your allowed?

    • Gerri Detweiler


      This is a very important financial decision for you and your husband. Please consult a tax professional with experience in these matters asap. The tax professional can help you figure out whether you would have to pay taxes on the forgiven amount, and roughly what that will come to. With that information you’ll be able to make a better decision.

  • Sam

    My reportable annual income has been less than $9k for the last three years. If I receive 1099-Cs due to ‘income’ from unpaid credit cards, and I can’t afford to pay the taxes, will the IRS attach the equity in my home (my only residence) or place a lien on my home? Or, will the IRS seize a portion of my qualified IRA (which has not provided me any income/distributions since I retired)? . With my low income level, can I claim insolvency dispite the equity in my home ($50k) and my having a qualified IRA.

  • http://ccomwp.wpengine.com/2012/02/just-received-a-1099-c-dont-freak-out/ Lenore

    I was discharged of a student loan with a 3 year monitoring period. Why am I getting a 1099-c this year if there is a 3 year monitoring period? Can I spread out the amount over the 3 years for taxes?

    • http://www.Credit.com Gerri Detweiler

      Lenore –

      Unfortunately the 3-year monitoring period has nothing to do with the tax issue. The lender has sent the 1099-C to the IRS for the tax year in which the debt was “cancelled” and you now must either include that amount in your taxable income or show the IRS why you should able to exclude it from your income. We’ve written about this in more details in this series of articles about 1099-Cs for cancelled debt.

      If you aren’t sure how to handle this make sure you talk with a tax professional. It’s probably not a small amount of money involved, and you want to do what you can to avoid getting stuck with a big tax bill.

  • Johnny

    We owned a bar we sold it and carried a note for $201,000 they went out of business they paid it down to $165,000. We took back the business we operated with a temporary license while we opened escrow to transfer the liquor license back to us and we would forgive the dept of $165,000. He withdrew the transfer of the liquor license forcing us out of business then opened escrow and is selling the license for $30,000 so the scum bag can pay his taxes he incurred during his time running the bar and when that’s done he will file ch 7 and bk us on the $165,000. I have a buddy that said I issue him a 1099c canceling the dept he is screwed because he now has to pay taxes on that dept and we would get a tax credit from the IRS for half? does that sound right? thanks

    • Gerri Detweiler


      I don’t know about a tax credit for the bad debt. For that you would need to talk with a tax advisor. As far as issuing a 1099-C, you can read the instructions for 1099-C forms to see if this debt qualifies. It may be that by filing this form before your former business associate files for bankruptcy you will potentially create a tax liability that wouldn’t exist if he included the debt in his bankruptcy. A tax advisor can explain in more detail. But it’s also possible that he will qualify for an exclusion if he is insolvent, which will allow him to exclude this “income” from his taxable income.

  • Bruno

    Sorry for my messy MSG above. On an iPhone for the 1st time and have stubby fingers…

  • Bruno

    I have a letter from chase indIcating they will be issuing a 1099c to the IRS. In 2008 they foreclosed my xwife’s 1st. I was affiliated with the heloc 2nd only which I cosigned on to help prevent my xwife’s foreclosure on the 1st mortgage. Wamu. At the
    tIme indicated I would not have to worry since the 1st was being foreclosed the 2nd would be dropped. 1 lie of many. The day of fOreclosire I have voice confirmation I owed nothing. However the heloc remained active by them. A letter from wamu then was received from. Execs at wamu a mOnth after foreclosure indIcating no 1099 would be isSued a me and I would be charged off and be collected against. I never was late on any payments on the heloc. Well. The chargeoff didnt occur so I waited weeks for it to no avail. I paid the next pmt as to prevent adverse credit report lates. Meanwhile. Collection agencies started on me. Still nO Chargeoff. This cycle continued for 15 months. By then wamu was being merge in with chase. At this point july of 2009 wamu performed the chargeoff. No lates on record. Now 3 years + later I have a letter from chase about a pending 1099 come October. To make things worse the heloc I helped my xwife’s with was given to her the cosigned to help my kids. Post divorce not lose their home. Furthermore the foreclosure was no judicial and the heloc should have been cleared at that time. See ccp580d. Now what. Bet you hAvent seen this one. Any advise as to prevent me recovering the chase 1099? A chargeoff with no lates 15 months after a foreclosure? Legal?
    Wamu elected tO ignore the heloc on foreclosure since I was paying on time. I didn’t agree to. Onto us to pay at all but kept paying to Prevent lates pending the chargeoff the took 15 months rather than the date of the wamu exec letter apr
    2008. Please help. Thanks

    • Gerri Detweiler


      The easiest way to deal with this would be to see if you qualify for an exclusion that allows you to avoid paying taxes on the cancelled debt. The most commonly used ones are the insolvency exclusion and the Mortgage Forgiveness Debt Relief Act. Keep in mind that the insolvency exclusion is supposed to be calculated when the debt is cancelled – and that’s not necessarily clear here. (Was it when they charged it off? Or three years after the collectors stopped calling?)

      If you don’t qualify for an exclusion or exception, then you could end up stuck including that amount in your taxable income. The IRS, quite frankly, doesn’t care that you believe the lender didn’t handle it properly. You may need to get a tax advisor to help you find a way to minimize or avoid taxes that may result here.

      You may want to peruse the other articles I’ve written about 1099-cs to see if they help you get some ideas for dealing with this. I wish I had a simpler answer for you!

  • William S.

    My wife and I are both now disabled. We filed bankruptcy for a reason….. we are now poor, broke, and renting after loosing all the equity built up since 1977.

    The problem is Advanta bank corp WAS a bank….. It was around 2009 that I discovered that bank was the worst four letter in the english language….. Some incompetent, ignorant soon to be fired from his failing position at a failing bank thought he would really ‘bank’ people and send 1099-c to those who had caused his job to be disposable. Unfortunately he must have been hired as a tax ‘genious’ in the state of Mass and given the power to pester the poor for pennies….

    I will keep you up to date.

  • William S.

    I got a tax bill from the state of MASS. It listed a 1099-C as the source of income.

    The debt was fully discharged in 2009 in a chapter 7 bankruptcy in which we were totally insolvent. It was from Advanta, a bank which themselves were closed and taken over by the FDIC in March 2010.

    I have written the state DOR back and have communicated with them [keeping notes] as well as my bankruptcy attorney. I filled out a form 982 and faxed it to the state but they are clueless.

    • Gerri Detweiler

      William – Form 982 is used for federal returns. My understanding is that most states offer similar exclusions to the federal ones, but that may not always be the case. I’d suggest you talk with a tax professional locally to find out how it works in your state. I would be interested in hearing what you find out!

  • Janet

    Just an inquiry. Am i able to to file a 1099-C for a mortgage and credit card on the same 982 form? And also claim insolvency for both?

    • Gerri Detweiler

      Janet – I am not a tax professional but if you look at Form 982 it prompts you to enter Total amount of discharged indebtedness excluded from gross income on line 2 and then gives you the ability to break it down in Part II. I would recommend you read the instructions for Form 982 and, if you still have questions, contact the IRS or a tax professional for help.

      • Jennifer

        I am receiving phones calls from an credit card debt that was charged off in September of 2008. The debt has been sold multiple times over the years and occasionally I will get a phone call but now this new person is saying she is going to file the 1099-C unless I offer to settle the debt. I can’t afford to pay the whole amount due and heard that if you make even the smallest payment the clock “resets”. My concern is that the debt was originally around $13K when it was charged off but she is saying I will get 1099’d for the interest and penalties which adds up to over $38K! Can they 1099 me for all of the interest and penalties that were accrued AFTER it was charged off?

        • Gerri Detweiler

          Jennifer – It sounds to me like the debt collection agency is threatening you with a 1099-C if you don’t pay the debt. Their threat may very well be illegal for a variety of reasons. Generally, collectors or creditors are supposed to send 1099-Cs three years after there has been no substantial collection activity on the debt. My sense is that these collectors have found a new way to try to scare people into paying old debts.

          If I were in your shoes, I’d talk with a consumer law attorney immediately. If the collection agency is making illegal threats then the attorney may be willing to help you for free since collectors who violate the law must pay attorney’s fees.

  • Robin

    My husband and I filed Chapter 7 in 2009. We were really upside down in our cars and were able to get the bank to accept a reaffirmation agreement for about half of the original loan amounts and keep our original interest rates. I paid my new loan off last year and received a 1099-C stating the debt was canceled in 2011. My accountant had not dealt with this issue before and decided it would be best to pay the taxes on the cancelled debt. My question is: Should the debt cancellation have occurred in 2009 or 2011?

    • Gerri Detweiler

      I am not a tax professional, so I cannot offer you tax advice.

      However, generally speaking, if the bank agreed to cancel part of the debt in 2009, then presumably that should have been a triggering event that would prompt a 1099-C to be issued for that year. Depending on timing, and your financial situation, you may have qualified for the insolvency exclusion.

      If the amount involved here was enough to cause you to pay substantial taxes (or miss out on a refund) then I’d suggest you contact a tax professional who has expertise in these matters to find out whether it’s too late to amend your 2011 return.

  • Dennis

    My wife became disabled and we worked to have her student loans discharged. I was not aware of the tax ramifications until I filed our taxes this year. Unfortunately, she passed away soon after the loans were discharged, but I’m sure she is turning over in her grave. This is something that should be spelled out clearly.

    • http://www.Credit.com Gerri


      I am so sorry to hear about your wife’s death and the mess this has created for you.

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  • Hernando Rojas

    my niece was buying a home in Jax Florida but did not have enough credit for the mortgage so my brother and i sign for the mortgage after she moved in the house depreciated and she moved out of the house last year the house was sold in a shortsale we thought the housse was sold and the end but now the three of us got a 1099-c from the bank for 94,884.00 can someone help how do i include this in my taxes.

    • Gerri Detweiler

      Unfortunately, as a co-signer on the loan, the IRS is going to expect you to include that income in your taxes unless you can show you qualify for an exclusion or exception that will allow you to avoid paying taxes on that amount, or you have a legitimate dispute as to the validity of the 1099-C. Given how much money you are talking about here – and the fact that you have the complication here of cosigners who didn’t live in the house while the primary borrower did – I recommend you all meet with a tax professional with experience dealing with 1099-C matters. Hopefully he or she will be able to guide you through avoiding having to pay taxes on that phantom income.

  • Peter h.

    some one help!! I’m 22 years old and i sign a house for my parents and it went to foreclosure last years. I still haven’t receive my 1099 c. The loan was from countrywide mortgage than it got sold to Washington Mutual Bank and Washington Mutual got sold to chase bank. I called chase bank, but they said they don’t have my loan. What do i do?! how do i get my 1099 c?

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  • Katharine Roberts

    My argument would be that the taxable income should be spread over the original debt repayment schedule – ie if it is student loan on which you had a 20 year amortization and it is forgiven in 3 years the taxable income should be reduence to 1/17th of the total each year for the next 17 years. Assuming your only other income is disability income this should lower the tax amount substantially!

    • Gerri Detweiler

      I hadn’t thought of that but it certainly does make sense!

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  • Kivette sams

    I was wondering if a car finance company can garnish your wages for a repossession and they are threatening to file a 1099c?

    • Gerri Detweiler

      Kivette –

      In most cases, creditors or collectors must first take you to court and get a judgment before being able to garnish your wages. And even with a judgment, there are specific procedures they must follow. If this is a third party collection agency that is threatening to garnish your wages without first having obtained a judgment, or if you live in California and a creditor is making those threats, I would encourage you to consult a consumer law attorney as soon as possible.

      As far as the 1099c goes, they may be required to send a 1099-C if they cancel or forgive the balance, or if there is no collection activity for three years. However, if they are not cancelling the debt and they are actively trying to collect, then it doesn’t sound like they should be sending a 1099-C – at least not yet.

      You may want to consult a consumer law attorney to find out more about your rights here.

  • sadie alexander

    I have a quick question about form 982.

    I received a 1099c for a credit card debt that was discharged in bankruptcy last year.
    I understand I check box 1a and list the amount from the 1099c in box 2.

    Am I supposed to do anything with Part II of this form, though? line 10a?

    • Gerri Detweiler

      Sadie –

      I can’t provide specific tax advice as I am not a tax professional. However, from what I can tell from my research, unless line 10a applies to you, then you don’t include anything there. Most situations where someone filed for bankruptcy are pretty straightforward and just involve the first part of the form.

  • Debbie

    I have a friend that got two 1099 C’s for cancellation of student loans (federal) due to total disability due to cancer of her husband in Jan 2011. However, her husband passed away in May 2011. I have been reading where federal loans of people who pass do not get passed on to their spouse. In this case, why would these two federal agencies send out 1099c’s. When I called and talked to them their reply was that is their policy to get in touch with IRS. I can understand one not having a death certificate yet but the other had one. I know about the insolvency for taxes and the form 982 but will she have to prove insolvency since they were federal student loans? This is just another burden on my friend and I am trying to help her out in all ways possible. She really freaked since the total of the loans were close to 139,000 and she can’t afford to count that as income. Thanks

    • Gerri Detweiler


      So sorry to hear of your friend’s husband’s death. And sorry to hear about the tax nightmare his widow is going through. Unfortunately, by IRS standards, student loan debt discharged due to total disability is taxable income. And lenders are required to send out these forms under IRS regulations. So, as long as the amounts reported are accurate, they really can’t be blamed for sending the 1099-Cs.

      She may not have to pay taxes on her late husband’s cancelled debts, but she is going to need to get professional advice from an accountant, CPA or Enrolled Agent with experience in these forms to make sure she handles it correctly. I know it’s just one more thing for her to deal with, but it’s really important that she get good advice given the amount of money involved.

  • Julie

    I live in California and back in the fall of 2006, I closed my 2 checking accounts with Bank of America because of identity theft. When I closed the accounts, they were at a zero balance. A few weeks later I find out the one account had a negative balance of $1,000 (all overdraft charges). The branch said that when they closed the account, there must have been something pending against it, so that’s why it didn’t close. Anyhow, 2 years later, I got a judgement from Brachfeld Law Group to appear in court for a new balance owend to “Plaintiff: BofA” for over $2500. I never appeared in court, we settled on payment arrangements.

    Feb. 2012 – I receive a 1099C form from Bank of America for approx. $2200.00. I of course freaked because I have been paying Brachfeld all this time. So I called up BofA to ask about the account, they told me it was never sued. She dug a little more and then finds the account I was paying on thru Brachfeld. So both of my accounts were NOT closed and each account charged over $2000 in overdraft fees. So BofA asks if I will be paying this off, and I said no, mainly because they issued a 1099C and I’m claiming it on my tax return. Second, isn’t there a “Statute of Limitations”?? They sued me for the one account, how come they didn’t sue for the second or come after me??? I had ABSOLUTELY NO CLUE about this second account.

    Now, I have received a reversal of the 1099C, I’m assuming so they can now collect on it?? Are they allowed to do this? And doesn’t the Statute of Limitations apply? Thank you.

    • Gerri Detweiler


      I assume the statute of limitations – which is four years for most consumer debts in California – would apply, but since I am not an attorney I can’t advise you specifically. (I am not clear why you ended up paying anything for this if it were due to identity theft.) If I were you, I’d talk with a consumer law attorney. California has a strong state consumer protection law, called the Rosenthal Act, that applies to creditors as well as third party collection agencies.

      You can usually get a free initial evaluation from a consumer law attorney in these situations, and if it looks like you have a good case, they may take your case for free because under the FDCPA the collection agency would have to pay your attorney’s fees.

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  • http://soburnjb@yahoo.com Joel Soburn

    I had 2 properties. I received a 1099A on a property that went into foreclosure. It says that the loan was for $480,000. It also says that the fair market value is $485,000. Makes no sense at all. Also the property, after the foreclosure sold for $370,000. How can the fair market value be more than what it sold for? Also do I owe taxes on any of this.

    • Gerri Detweiler

      Joel – Did you see my other article about what to do if you get a 1099-A? In that article, I interviewed a tax professional who said these forms are often wrong.

      I am not a tax advisor, so I am going to have to recommend you talk with one to figure out how to deal with this so you don’t end up paying taxes on any forgiven debt.

  • http://soburnjb@yahoo.com Joel Soburn

    I received a 1099C on a property that was I had to let go into foreclosure. The loan was for approx. $600,000. The property was taken back by the bank and sold for $485,000. Do I owe taxes on any of the monies above?

  • Jay

    How do I know I am insolvent. I received 1099-C from my creditors and the amount total is $18000. I looked at form 982 but I couldnt figure out what boxes to check. I calculated my assets and liabilities at the time for debt cancelation. Assets $8500.00 I dont own a car and mortgage. Liabilities $21500 + $41000(Student loan) = $62500, my liabilities are higher than my assets, where do i put this amount. Does IRS looks at my Income at the time of debt cancelation. Thanks

    • Gerri Detweiler


      They don’t make it easy do they?

      If you read the instructions for Form 982 for line b (insolvency not including bankruptcy) it says:

      For details and a worksheet to help calculate insolvency, see Pub. 4681. Example. You were released from your obligation to pay your credit card debt in the amount of $5,000. The FMV of your total assets immediately before the discharge was $7,000 and your liabilities were $10,000. You were insolvent to the extent of $3,000 ($10,000 of total liabilities minus $7,000 of total assets). Check the box on line 1b and include $3,000 on line 2.

      In Publication 4681, which is available on the IRS website, it says to calculate the insolvency immediately before the cancellation. There is a worksheet in Publication 4681 you can use to calculate insolvency.

      I also encourage you to talk with a tax professional for help.

  • Kim

    Gerri, I’m In the same situation as the woman above. Student loans
    91K were discharged for total and permanent disability. Tax obligation is 26 grand federal, 5 grand state . I can’t pay either bc of my income (small pension and ssd, which covers my current bills); I dont qualify for insolvency or public service forgiveness (I was a social worker but the latter was enacted after I was already in my career ten years. I became disabled b4 the 120 payment requirement)
    This is a serious loophole that needs to be rectified! What legislation is on the table, and/or who can I contact about this ?

    • Wendy Reed

      Hello Kim, I read your story on yahoo: http://gma.yahoo.com/jersey-womans-student-loan-debt-creates-tax-nightmare-134134842–abc-news-topstories.html who did your tax return? You do not owe the state of NJ $5000 for discharge of student loan, because cancellation of indebtedness is not taxable to the State of NJ–I have a letter form NJ Division of Taxation stating this because it is not mentioned in their publications and I doubted if it was taxable—I would like to assist you with revising your NJ return—I work in the HR block in Avenel NJ–I’m an Enrolled Agent, #81489. Don’t know where you are located though….Also, what about insolvency? Did you actually own more assets than liabilties when the student loans were cancelled?

  • Mike

    I received a 1099-C from Capital One for a debt I discharged in bankruptcy over 8 years ago. I called them and ask them to send a corrected 1099-C but it still did not indicate the debt was discharged in bankruptcy. Is there anything we can do to make sure these creditors get these forms right?

    • Gerri Detweiler

      You don’t have to pay taxes on debts discharged in bankruptcy. Use Form 982 when you file your taxes. I have been unable to get an answer from the IRS with regard to your question about possible penalties for those who file incorrect 1099-C’s and won’t fix them. The IRS does not appear to offer any mechanism for reporting this kind of situation.

  • Jonny

    My wife and did a short sale on our rental property. We each received a 1099-C from the mortgage comapny reporting the entire amount of the debt canceled (total amount canceled about $125,000). I called the mortgage company and they said that they followed IRS instructions in preparing the 1099-C. By what I see in the IRS instructions this appears to be correct.
    How do we report this on our return? It looks like we should only report the amounts on one of the 1099-Cs. If we do this though is the IRS going to say that we actually had $250,000 in debt canceled, or what? I really don’t want to, and it would be tough financially to do right now, go to a CPA or someone like that.

    • Gerri Detweiler


      First thing I suggest is to call the IRS and ask them how to handle it. Let me know what they say.

  • Enid

    I have received my 1099c for Deed in lieu foreclosure. The debt was for 141,900. However on the 1099c form the cancelled debt box # 2 is for 58,992. and the fair market value box #7 is for 0.00. How should I complete my taxes with this information? Is there a way to enter the right amount and IRS can investigate this? This does not make sense, I have contacted Bank of America, and customer service just send an email to the Tax Department for review and nobody has called me yet. Bank of America customer service is the worst.

    Any adivise, please?

    • Gerri Detweiler

      Enid –

      Have you checked whether you qualify for an exclusion, either under the Mortgage Debt Relief Act or the insolvency exclusion? That may be the easiest way to deal with it.

      • Lindsay

        Hi Geri,

        I received a 1099-C after my short sale. I had an 80/20 and had to settle a debt forgiveness with the 20, which was a HELOC. That bank (Wells Fargo) sent me a 1099-C reporting it as a personal loan. When I had my taxes done, they told me that if Wells Fargo had reported it differently, I would be protected under Mortgage Debt Relieft Act. Is there anything I can do?

        – Lindsay

  • Melvin

    Gerri we filed for Chap 7 in May of 2010 and had a property discharged “surrendered” with that filing. Well its 2012 and we received a 1099-c from the bank that the loan was processed with. Under (box #6) of the 1099-c “Bankruptcy” had a “No” under it and (box.#5) stated “Was borrower liable for repayment of debt” and the answer was “yes”. I have all my paperwork from the courts stating we are discharged. My question is will form 982 still help me to cancel this debt?

    • Gerri Detweiler


      Contact the creditor who sent the 1099-C right away and tell them you want a corrected 1099-c. Then let me know what they say OK?


      • Melvin

        I called the lender/creditor and this is what I got from them. Even if I surrendered the property through bankruptcy and got discharged from it, the property is still under my name (i still own it) from the day the courts discharge me from it until it gets sold from foreclosure. I did not reaffirm the property nor make any arrangements with the lender/creditor to keep the property after I was discharged from it. I think that the lender/creditor was just trying to pull a fast one on me. Answer me this, if the courts say I don’t own the property after I get discharged from it then shouldn’t it go back to the creditor? What do you think? Do you think I can go after the creditor for sending me a false document that they are not willing to change?

        • Gerri Detweiler


          I am not a tax advisor, however, when I researched this question generally – when you get a 1099-C that is wrong – I was told you can fill out Form 982 and then include a statement that explains why the 1099-C is wrong.

        • Gerri Detweiler

          Melvin – as a follow up I spoke a tax attorney who does take on these types of issues. You might want to talk with him to see what he thinks. http://www.tuftslawfirm.com

  • http://www.terrorisminblue.com John McNamara

    I just received a 1099-C from Bank of America. I do not remember the debt, but I have had no dealings with them for more than six years. The statute of limitations on creduit card debt in Florida is 4 years.

    Is there a time frame within which the banking institution has to “forgive” a debt, and a time limitation on when they may file a 1099-C with IRS?


    • Corrie

      I have a similar question….10 year old debt in Utah, I live in Ma, they just contacted me 3 days ago….

      • Gerri Detweiler

        Hi Corrie – Saw your question. Can you elaborate? Who is “they?” Can you describe the situation in a little more detail? Thanks!

  • Michael Schreiber

    Actually, Fran. Student loans are generally non-dischargeable in bankruptcy, however, there are exceptions, as I wrote about here: http://blog.credit.com/2011/12/defaulting-on-private-vs-federal-student-loans/2/

    So, Gerri’s inquiry is not off base.

    We always encourage readers to call us out if they think we’ve made a mistake about something. This is often very complicated stuff and none of us are infallible. But there’s no need to be condescending, even if we are wrong. Thanks and please keep commenting… and calling us out if you think we’re wrong!

  • Fran

    Gerri, sorry to inform you but Student Loans are the only loans you CANNOT include in a Bankruptcy!!! Please learn about it before dishing out information to people!!!

    • http://www.credit.com Gerri


      It’s true that it can be very very difficult (some say nearly impossible) to discharge student loans in bankruptcy – but not completely so. There are situations where borrowers are able to discharge them by showing that repaying the debt would create an undue hardship, and total disability may be one of those.

    • MD

      Dear Fran,
      I think you mean Gov Student Loans can’t be included in a Bankruptcy. Other student loans can be.

      • Clint

        Gerri is completely correct. A friend of mine with multiple heart conditions, advanced RA, and severe psychiatric problems was able to get his student loans of about $31,000 dismissed through bankruptcy. His medical and living expenses already exceeded his income, which was one factor in the successful dismissal.

    • Chrissy Inconnecticut

      Pardon me Fran, but I discharged student loans through bankruptcy so maybe you should learn a few things before you do

    • Paulette

      NOT TRUE – if they are Government backed student loans you can’t have them discharged but if they are NOT Govt. backed – they CAN be discharged – check the government sites – don’t take someone’s word for it here PLEASE!

      • hessa

        You are all very misinformed. Federal loans can not be discharged through bankruptcy. However, since 2005 Private Loans will not be discharged through regular bankruptcy either (they are a different category). It is not bankruptcy to discharge them, it is another process and you must absolutely be unable to pay them back – the requirements are much more stringent than regular credit bankruptcy. @ Chrissy, you should learn a few things.

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