Are 1099Cs dischargable? 18 Answers as of February 13, 2012

You cannot discharge the taxes owed on the debt discharge.

A 1099c is not a debt, it simply a report to the IRS that your debt was forgiven or cancelled or whatever. The debt that was cancelled can be listed in your bankruptcy schedules as a precaution to give notice to the bank that they cannot still come after you. Whether a creditor can still come after you after a 1099 is a very tricky question. There are a limited number of instances where they probably can. The problem is that tax law and contact law are different animals. Cancellation in one context doe not mean the same thing in the other. If you were insolvent when the 1099 was issued, you may not be liable for taxes on the forgiveness of debt income. See IRS Form 982 and Publication 4681. you can go back and amend previous returns if necessary.

Yes, the portion the creditor charged off is sometimes still sold to collection agencies and will be taken care of through bankruptcy.

I would include it as an unsecured debt just to be safe. I don't think they can go after you once they have written the debt off and reported it to the government, but I have not had the issue arise where the mortgage company tried to go after someone after issuing a 1099C, so I have not researched it specifically. I always would rather list someone and find out later it wasn't necessary than not list them and find out later, I should have. Good luck!

I always include them when I file a petition. Not only does that keep the debt from "rising from the dead" like you fear, but I have had some success at getting the IRS to recharacterize the debt as "discharged", which has no tax consequence, instead of "charged off" or "forgiven" which the I.R.S. treats as if it were actual income.

1099 Cs are not debts and cannot be included in a bankruptcy filing. However, please do keep reading. I am not a tax attorney or professional, but from reviewing the IRS website it seems clear to me that you need to include the 1099-C in the income from the year it was issued. The next, more important question is- do you have to pay taxes on this "income." IRS rules seem clear that if the Debtor included the debt in bankruptcy or was insolvent, s/he does not have to pay taxes on the matter. Also, if the real estate was your residence and met other criteria, you should not have to pay taxes on the cancellation of the debt either. See IRS Publication 4681. It appears that if you qualify for the cancellation of debt to not be taxable, you turn in the 1099-C with your other 1099s and then fill out a separate form, Form 982, to turn in with your taxes. Be sure to bring this up to your tax preparer, including the form and publication numbers listed above. The qualified tax professional can then help you determine if you fall into an exception that prevents you from paying taxes on the cancellation of this debt.

No, the 1099C is to be given to your accountant for tax purposes for that tax year and is not meant as your debt. You may be exempt from paying taxes on the short sale if it was a primary residence, but your accountant will have to file it regardless.

It may or may not be dischargeable in a CH. 7. It depends on the year and whether you were insolvent at the time of the short sale.