So you’ve accrued a bit of debt. It’s not the end of the world.
Debt is stressful, overbearing and can build up quickly. When this happens, you may need to eliminate it altogether. In a situation when you need to cancel your debt completely, you would contact your creditor and they’d issue you form 1099-C, as shown below.
What is form 1099-C?
The 1099-C is also known as the Cancellation of Debt. The most common reasons that you would receive this form are as follows:
- You’ve not made any payment on a debt for at least three years and there has been no collection activity for the past year.
- You negotiated a settlement to pay your debt for less than the amount you owed and the lender/creditor forgave the remaining amount.
- You sold a home in a short sale where the lender/creditor agreed to accept less than the full amount due to them
- You’ve owned a home that entered into foreclosure with a deficiency (the difference between the value of the home and your debt on it) which was forgiven or remains unpaid.
What does each box on the 1099-C mean?
Tax forms, in general, are intimidating to most of us. The tricky language and minuscule text paired with our immediate panic can send anyone into a frenzy. Let’s break this form down box by box and see if all your questions can’t be answered. (more…)
