You wrote, “They are saying even though we filed ch.7 we still are responsible for money owed!“
A: No, they are not saying that.
The bankruptcy discharge your personal obligation, but that did not release the lien against the property; that lean is the basis for a foreclosure action.
An independent, non-compelled transfer of lien-free, marital real estate would likely raise an issue of fraudulent conveyance to avoid Creditors and possible reversal (clawback) of the assets under state law.
An order of a divorce court transferring a real estate interest gives some protection to such charges, but timing and other issues are critical.
A change in income may solve one issue of conversion, but you must still be otherwise qualified to initiate (by conversion) a Chapter 7 AND the conversion must make sense under a liquidation analysis of assets required for a Chapter 7.
You wrote, "I filed for Chapter 7 this year (2013). If I were to settle on a student loan a month or so after filing for Chapter 7, am I automatically insolvent when I file my 2013 taxes? I am concern about the taxes from the 1099-C."
A: You will file IRS form 982 for your 2013 taxes and mark box
1a "Discharge of indebtedness in a title 11 case"
If you settle a bankruptcy, non-dischargeable student loan, also mark box: 1b "Discharge of indebtedness to the extent insolvent (not in a...