Reporting Cancelled Debts

If you have debt is forgiven or discharged for less than the full amount you owe, the debt is considered canceled in the amount that you don’t have to pay.

Additionally, if the creditor cannot collect, or gives up on collecting, you will have a cancellation of debt for the amount you’re obligated to pay.

Debts include examples of the following:

• You own property subject to a debt
• foreclosure
• repossession
• voluntary transfer of the property to the lender
• abandonment of the property
• mortgage modification

After a debt is canceled, the creditor may send you a Form 1099-C, Cancellation of Debt. This form will show the amount of cancelled debt, the date of cancellation, etc.

For more information such as exclusions for a cancellation of debt, click here.

This entry was posted on Monday, November 16th, 2020 at 1:38 pm and is filed under Income. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.