Cancelled Debt 1099C

February 6, 2014

Often times when a creditor charges off a debt, they can send you a 1099C for the canceled debt. When prepping your tax return this can increase your income. There are two exceptions to the canceled debt that can assist many Debtors who are in financial straights: bankruptcy and insolvency.

Debt that is discharged in a bankruptcy case is not included as income on your tax return. This is true for Chapters 7, 11, 12, and 13. The exception only applies to debt that is successfully discharged at the completion of a case. Therefore if you were in a chapter 13 case that was dismissed before the discharge it the exception won’t apply.

If you have filed for bankruptcy and received a discharge you will typically not receive a 1099C from your creditors. However if you do the income should be reported on a Form f982 and attached to your federal income tax return.

You do not need to include any canceled debt if you were insolvent immediately before the cancellation. To determine insolvency can be a difficult analysis however in it’s most basic sense it is where your total debt is greater then the total fair market value of all of your assets. Your assets are everything you own. This includes property that has liens against it and property that is normally exempt. For more information about insolvency you can review the IRS publication p4681.

If you have issues with too much debt and you are looking for your debt relief options contact the experienced attorneys at  Fears Nachawati Law Firm to set up a free consultation. Call 1.866.705.7584 or send an email to

More Blog Posts


Use the form below to send us a note, call us at 214.890.0711 or chat with us live. We are eager to help with all your legal needs. Please keep in mind that any unsolicited information sent through our website cannot be treated as confidential. Contacting us through this site does not create a representation relationship with Fears Nachawati.

Inquiry Type

  • General
  • Personal Injury
  • Immigration
  • Bankruptcy
  • Drug Litigation
  • Family Law


With offices in Texas, Florida and Colorado and attorneys licensed in Texas, Florida, Colorado, Arkansas and Oklahoma, Fears Nachawati is dedicated to attaining the best possible solutions for our clients’ business and personal needs. We strive to be professionals who are creative, empathetic and reliable.

All Areas Served

We Can Help

Contact Fears Nachawati today

Free Consultation

Live Chat (Online Now)