I'm sorry for your loss, but since the finance company forgave the balance due after the insurance payout, you don't have to pay it back. Therefore it's no longer borrowed money. That money is "given" to the recipient whose SS appears on the 1099-C and it's now taxable income to that person. They have to report it as such on their tax return. Since your husband was a cosigner on the loan, that makes him 100% liable now that the other cosigner of the loan has passed. Sorry for the bad news.
