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 >>
  2. Do I have to pay taxes on the amount of my Federal Direct Loan Forgiveness?

    I have been granted student loan forgiveness on my daughter's $18K loan. I have exceeded the 120 loan repayment requirement, ... Read Answer >>
  3. Can personal loans be included in bankruptcy?

    Read about debts that are dischargeable when filing for bankruptcy. Learn about how personal loans are treated when filing ... Read Answer >>
  4. Are student loans dischargeable after bankruptcy?

    In limited cases of bankruptcy, the courts may discharge a filer's partial or full student loan debt. Read Answer >>
  5. What debts can I discharge when filing for bankruptcy?

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