Cancellation of a debt will affect your credit history. Your credit history will likely say that the debt was forgiven/charged off. With regards to the tax consequences, you should see a tax professional.
Cancellation of debt will adversely affect your credit. The magnitude depends upon many other factors regarding your credit history.
For more information on debt forgiveness, 1099-A, and 1099-C, see:
There is also an IRS Publication 4681:
Frank W. Chen has been licensed to practice law in California since 1988. The information presented here is general in nature and is not intended, nor should be construed, as legal advice for a particular case. This Avvo.com posting does not create any attorney-client relationship with the author. For specific advice about your particular situation, please consult with your own attorney.