Debt Discharge

DEFINITION of 'Debt Discharge'

The cancellation or forgiveness of a debt. Debt discharge results in taxable income to the debtor unless the forgiveness is a gift or bequest.

BREAKING DOWN 'Debt Discharge'

When a debt is discharged by an institution, the debtor will usually receive a Form 1099-C that shows the amount of debt forgiven. The debtor must then report this as miscellaneous income on the 1040.

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RELATED FAQS
  1. What debt cannot be discharged when filing for bankruptcy?

    See what kinds of debts cannot be discharged through a bankruptcy and which debts are very difficult to discharge unless ... Read Answer >>
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    Discover which types of debt can be discharged through a Chapter 7 or a Chapter 13 bankruptcy and which debts require an ... Read Answer >>
  4. Will my student loan be canceled (discharged) if I die?

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