Glossary term
Form 1099-C (Cancellation of Debt)
Short answer
Form 1099-C, Cancellation of Debt, is a tax form. A lender or debt collector may file it when it forgives or cancels $600 or more of debt. You typically get a copy, and the IRS gets one too.
Why it matters
A debt can be canceled in a few ways. A creditor might settle it for less than the full balance, or write off a charge-off it stops chasing. Either way, the forgiven amount can count as taxable income in some cases. That is why a 1099-C matters at tax time.
But exceptions can apply. Debts discharged in bankruptcy, or amounts canceled while you are insolvent, may not count as income. These rules are detailed and depend on your facts.
Getting a 1099-C does not decide your tax bill by itself. A form can also be issued in error, or for the wrong year. Because tax treatment depends on your own situation, this page is general education only. A qualified tax professional can review your 1099-C and explain how it applies to your return.
Example
Grace settles a $6,000 credit card debt for $2,500. The creditor cancels the remaining $3,500. Because more than $600 was forgiven, it sends her a Form 1099-C and files one with the IRS. Whether that $3,500 counts as taxable income depends on exceptions like insolvency. Rather than guess, Grace brings the form to a tax professional to find out how it affects her taxes.
Terms used on this page
Guides that use this term
- Evaluating a Debt Settlement OfferHow to evaluate a debt settlement offer: the terms that belong in writing before you pay, tax and statute-of-limitations risks, and where to get real help.
- Bankruptcy Discharge: What It DoesWhat a bankruptcy discharge order actually does — the permanent injunction, why liens can survive, discharge vs. dismissal, and how to handle violations.
- Statute of Limitations on DebtHow the statute of limitations on debt works, why it differs from credit reporting limits, and the payment trap that can restart the clock in some states.
Educational information — not advice
This topic involves court deadlines and rights you can permanently lose.
This page provides general educational information about credit, debt, and consumer protections. It is not legal advice, financial advice, or credit repair services, and reading it does not create any professional relationship. Laws, procedures, deadlines, and dollar amounts vary by state and change over time.
Before acting or deciding not to act, strongly consider consulting a licensed attorney in your state. If cost is a concern, legal aid organizations may help for free. See our full disclaimer.