Debt

1099-C (Cancellation of Debt) The tax form lenders send when they forgive debt you may owe taxes on

Jordan Park By Jordan Park, Senior Debt Relief Editor · Updated 2026-06-09
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A 1099-C (Cancellation of Debt) is the IRS tax form a lender or creditor issues when it forgives $600 or more of debt you owed. The canceled amount is generally treated as taxable income, so you must usually report it on your federal return (see IRS Topic 431). This form is common after debt settlement, when a creditor accepts less than the full balance and writes off the rest. However, the forgiven debt isn't always taxable. Key exceptions include the insolvency exclusion—when your liabilities exceeded your assets at the time of cancellation—and debt discharged in bankruptcy. To claim these exclusions, you typically file IRS Form 982 alongside your return. Because the tax impact can be significant and depends on your specific finances, many people consult a tax professional after receiving a 1099-C.
Also Known As
Form 1099-C Cancellation of Debt income COD income Debt forgiveness tax form
Used in Context
  1. After settling a credit card balance for less than you owed, the creditor mailed you a 1099-C for the forgiven portion.
  2. A debt relief specialist matched through Dreamy Leads explained that the canceled amount on your 1099-C might be excluded if you were insolvent.
  3. When you completed bankruptcy, the discharged debt didn't trigger taxable income even though a 1099-C was filed.
Related Terms
Debt Debt Settlement Negotiating with creditors to pay less than the full balance — significant savings, real risks Debt Charge-Off When a creditor writes off a debt as uncollectible — but the debt still exists and can be collected Debt Unsecured Debt Debt with no collateral behind it, like credit cards and medical bills Debt FDCPA (Fair Debt Collection Practices Act) Federal law that limits how third-party debt collectors can contact and treat you
Frequently Asked Questions

Do I have to pay taxes on a 1099-C?

Often, yes. The IRS generally treats canceled debt as taxable income (see Topic 431). But exceptions exist—if you were insolvent when the debt was forgiven, or the debt was discharged in bankruptcy, some or all of it may be excluded. Report it accurately and consider professional tax help.

When does a lender issue a 1099-C?

A lender issues Form 1099-C when it forgives $600 or more of your debt. This commonly happens after a debt settlement, when a creditor accepts less than the full balance and writes off the remainder. The form reports the canceled amount to both you and the IRS.

Can I avoid tax on forgiven debt?

Sometimes. The insolvency exclusion applies if your debts exceeded your assets when the debt was canceled, and debt discharged in bankruptcy is also excluded. These aren't automatic—you typically file IRS Form 982 to claim them. Outcomes depend on your finances, so consult a tax professional.

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