If you had debt cancelled and are no longer obligated to repay the debt, the amount forgiven is considered income on your tax return. However, if the discharge of indebtedness occurred as a result of a title 11 case, the debt generally does not have to be added to your return as income.
What is a title 11 case?
Title 11 refers to a type of bankruptcy proceeding. A title 11 case is a case under title 11 of the U.S. Code (relating to bankruptcy). However, it only applies if you are under the jurisdiction of the court in the case and the discharge of indebtedness is granted by the court or is under a plan approved by the court. If you filed bankruptcy and were released from certain debts, you would need to contact your bankruptcy lawyer or the court where your case was filed to determine if you can exclude the forgiven debt from income on your return.
What amount of the forgiven debt can be excluded from income?
Generally, the full amount of forgiven debt can be excluded if it was discharged due to being included in a title 11 bankruptcy proceeding. For additional information about the Reduction of Tax Attributes Due to Discharge of Indebtedness or Form 982, please click here.
From within your account, go to
- Federal Section
- Select My Forms
- Less Common Income
- Cancellation of Debt (1099-C, Form 982)
- Exclusions (Form 982)