Received 1099-C from Discover for Bankruptcy Chapter 7
I was told by my Bankruptcy attorney that debt discharged is not income due to my being insolvent.
Therefore, did Discover card err in sending a 1099-C Cancellation of Debt form to me that says "debt discharged in bankruptcy" on line 6.
Do I need to get them to send a corrected form 1099-C?
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You have to file form 982 as explained on these pages:
www.bankruptcylawnetwork.com/in-bankruptcy-dont-fear-the-1099-c/ http://community.intuit.com/posts/debt-cancellation-1099-c-and-form-982-insolvent www.moranlaw.net/taxfaq.htm
No, it's not income. But the 1099-C is sent when the creditor charges off the debt.
When you file your taxes, you need to tell the IRS that the charge-off is not taxable. The most common exceptions are:
The debt was discharged in bankruptcy BEFORE the cancellation.
You were insolvent when the debt was cancelled. Insolvent has a specific meaning to the government.
If your state has income tax, check on how they handle this scenario.
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