Client rec'd 1099c for student loan. client became disabled and her student loans were forgiven. Now she has rec'd 1099 for the entire amount. Can insolvency work for this kind of cancellation of debt, like credit card and other debt?
-
-
I know it cannot be forgiven in bankruptcy. -
I can't see anything that would prevent insolvency from being applied.
The inability to discharge it in bankruptcy is a different type of issue. That just means it can't be canceled by bankruptcy. If it's not canceled, there's no 1099-C, no canceled debt, no income, and it remains a liability owed.
In this case, one of the rare exceptions to forgiveness of student loans has apparently been allowed due to hardship. Unlike the special cases for public service (e.g. forgiving medical school loans if the young doctor agrees to work in a depressed area for some number of years), this is - as far as I know - taxable COD income, unless insolvency or other exceptions apply.Comment
-
The couple, I believe, is insolvent. Husband has lots of student loans, they're young, just purchased a house, etc. As long as student loans can be used in the insolvency worksheet, I think we can get all or at least part. When she applied for disability forgiveness she wasn't told that a 1099 c would be sent. Just didn't realize the implications, I guess. Thanks for the imput.Comment
Comment