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...
You wrote, "Chapter 7 question. I have a house which I rent. I use to live there. As a result I can't declare the house as a business."
A: I suggest you are mistaken and that you are operating a business.