keeping the car and having income from debt discharge are separate issues. one is tax the other is legal. say they repo'd the car you would still have debt forgiveness for the difference between what was owed on the loan and the fair market value (IRS PUB 4681). the IRS rules say when a lender or creditor cancels $600 or more of debt, they must issue a 1099-C. so why you didn't get one is a mystery. how much to report as income
I'm not a lawyer but I would guess that nothing would prevent the loan company from repoing the vehicle at any time.
I would say that you have to report as income the $20K + the pro rata personal portion of interest discharged (based on % of personal use of vehicle) again based on IRS PUB 4681. Interest included in canceled debt. If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Whether
the interest portion of the canceled debt must be included in your income depends on
whether the interest would be deductible if you paid it. See Deductible Debt under Exceptions,
later.
