This would normally be considered taxable income but there are some exceptions, one of which is the insolvency exception. You need to discuss this with an experienced tax preparer or CPA who can advise you whether you fall within any of the exceptions to taxation.
The information provided herein is general information only and not legal advice. The information provided herein does not create an attorney client relationship and is not a substitute for having a consultation with an attorney. It is important to have a consultation with an attorney as the information provided in this forum is limited and cannot possibly cover all potential issues in a given situation.
This form usually indicates that you have received a taxable benefit, in the form of not having to repay a debt.
This is evidence that the creditor may have abandoned collections, although the IRS considers this phantom income, unless you file bankruptcy and receive a discharge, which can be an exception.
A tax professional may be of assistance, and there is a tax form available to claim this deduction.
You may wish to prepare for an adjustment of your taxes from the IRS in the future.
If your debts are overwhelming, this may be a good time to file, to discharge all your debts, including this tax issue.
General legal advice is offered for educational purposes only. A consultation with a qualified attorney is required to determine specific legal advice as to your situation and applicable law. We are a debt relief agency and we help people file for relief under the bankruptcy laws.