Posted on June - 21 - 2011
What to do if a creditor sends you a Form 1099 trying to make income out of your discharged debt
Creditors who were discharged in bankruptcy are not supposed to send you 1099 forms because a bankruptcy discharge is not a taxable event. Some do it in and out of bankruptcy in order to get you to pay a debt. I think it is a violation of the automatic stay if done during the bankruptcy and a violation of the discharge injunction if done after you received your discharge. Contact your bankruptcy attorney about filing an appropriate adversary proceeding against the creditor.
The good news is that the IRS has a form specifically for this purpose to claim that cancellation of a debt is not income. One of the options here is discharge in a case under Title 11 which is a bankruptcy case. The form can be downloaded by clicking on the link below:
Form 982 needs to be filed with your tax return and contact your bankruptcy attorney
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