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.

RELATED TERMS
  1. Discharge In Bankruptcy

    A permanent order that releases the debtor from personal liability ...
  2. Cancellation Of Debt - COD

    When a creditor forgives a debt without requiring consideration ...
  3. Debtor

    A company or individual who owes money. If the debt is in the ...
  4. Debt Fatigue

    When a debtor stops making payments on his or her debts and starts ...
  5. Reaffirmation

    An agreement made between a debtor and a creditor to repay some ...
  6. Debt Assignment

    A transfer of debt, and all the rights and obligations associated ...
Related Articles
  1. Personal Finance

    Student Loan Forgiveness: How Does It Work?

    With student loan debt at an all-time high, more graduates are considering loan forgiveness programs.
  2. Personal Finance

    Debt Forgiveness: Escape Your Student Loans

    There are income-based plans and forgiveness for public-service employees. The latest wrinkle: loan forgiveness because the school defrauded you.
  3. Personal Finance

    How To Get Out Of Paying Your Student Loans

    There are two ways to earn student loan forgiveness: work in public service, or make payments though an income-contingent payment plan for a long time.
  4. Taxes

    What's a Debtor?

    A debtor​ is an individual or company that owes money.
  5. Taxes

    No Debt Forgiveness For The Tax Man

    Debt settlement sounds like a free lunch, but it has tax consequences.
  6. Personal Finance

    Severely Disabled Get Federal Student Debt Forgiveness

    A bureaucratic nightmare will end soon for some 387,000 severely disabled Americans who collectively owe $7.7 billion in student debt.
  7. Financial Advisor

    Student Loan Forgiveness for Teachers

    If you are a teacher and have student loans to repay, you may qualify for a loan forgiveness program.
  8. Taxes

    Understanding Bad Debt

    Bad debt is money a company or lender is owed, but is unable to collect.
  9. Investing

    Buying a House After Bankruptcy? It Is Possible!

    Buying a house after bankruptcy is not impossible. It just takes time to repair your credit score and demonstrate you're a good risk for a mortgage.
  10. Taxes

    Student Debt: Is Bankruptcy The Answer?

    Student loans can be a huge financial burden, but bankruptcy won't necessarily save you from paying.
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. 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 >>
  3. 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 >>
  4. What debts can I discharge when filing for bankruptcy?

    Discover which types of debt can be discharged through a Chapter 7 or a Chapter 13 bankruptcy and which debts require an ... Read Answer >>
  5. Will my student loan be canceled (discharged) if I die?

    Federal loan servicers discharge debts when borrowers die to protect co-signers and spouses, but private lenders are free ... Read Answer >>
Hot Definitions
  1. Graduate Management Admission Test - GMAT

    A standardized test intended to measure a test taker's aptitude in mathematics and the English language. The GMAT is most ...
  2. Magna Cum Laude

    An academic level of distinction used by educational institutions to signify an academic degree which was received "with ...
  3. Cover Letter

    A written document submitted with a job application explaining the applicant's credentials and interest in the open position. ...
  4. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  5. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  6. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
Trading Center