filed bankruptcy and canceled debt

I filed BK 2010 and primary home debt forgiven now have mortgage but it is much less


28 people found this helpful

The Internal Revenue Code ( see section 108 of the IRC) excludes the discharge in debt achieved under the bankruptcy code from its definition of income.  One of the advantages of bankruptcy is that it provides for the cancellation of debts under the Code will not EVER be construed as income for tax purposes.  So if you file bankruptcy, you do NOT have to report the debts forgiven or pay taxes on them.  This is in contrast to debt settlement, where any relief provided may well be taxable income.


For various reasons, some creditors may still send you a 1099C.  If this happens, make sure that the debt was discharged in bankruptcy and not settled before the bankruptcy (which could be taxable).  If it was discharged, file IRS Form 982.  While this form can be complicated, for the consumer with debts discharged in bankruptcy it is simple.  Just check the box “1a” “Discharge of indebtedness in a title 11 case” (“Title 11” is the bankruptcy code) then list the amount on line 2.  If the debt was secured by an asset you kept (such as real estate), ask your tax preparer or attorney about the completion of line 10a, otherwise you are done.  For businesses it is more complicated, but for a consumer it is just that simple.

Was this answer helpful? Yes No

No answers have been posted

More Actions

People come to TurboTax AnswerXchange for help and answers—we want to let them know that we're here to listen and share our knowledge. We do that with the style and format of our responses. Here are five guidelines:

  1. Keep it conversational. When answering questions, write like you speak. Imagine you're explaining something to a trusted friend, using simple, everyday language. Avoid jargon and technical terms when possible. When no other word will do, explain technical terms in plain English.
  2. Be clear and state the answer right up front. Ask yourself what specific information the person really needs and then provide it. Stick to the topic and avoid unnecessary details. Break information down into a numbered or bulleted list and highlight the most important details in bold.
  3. Be concise. Aim for no more than two short sentences in a paragraph, and try to keep paragraphs to two lines. A wall of text can look intimidating and many won't read it, so break it up. It's okay to link to other resources for more details, but avoid giving answers that contain little more than a link.
  4. Be a good listener. When people post very general questions, take a second to try to understand what they're really looking for. Then, provide a response that guides them to the best possible outcome.
  5. Be encouraging and positive. Look for ways to eliminate uncertainty by anticipating people's concerns. Make it apparent that we really like helping them achieve positive outcomes.

Select a file to attach:

Do you still have a question?

Ask your question to the community. Most questions get a response in about a day.

Post your question to the community