Pennsylvania normally doesn't tax canceled debt unless it's business related. (see below)
Cancellation of a personal debt, such as a credit card or other unsecured debt, is generally not taxable on PA Income Tax return UNLESS the debt is business related, or property used in a business.
Cancellation of debt can also be income in instances where a mortgage on a principal residence is forgiven as a result of a foreclosure if the taxpayer didn't qualify for an exclusion of gain.
Please see the following link for more detailed information about Pennsylvania Department of Revenue - Cancellation of Debt .
