1099c required?

[luke]

Is a financial institution required to send a FORM 1099-C to a borrower who is walking away from a loan?
I thought it was optional and based on the financial institutions own rules/regulations?
The entire back story is too complicated to post here but 2 criminals basically duped a mentally challenged person into signing over a deed - then bank loaned them money on that property - criminals are willing to walk away (sign deed BACK over and NOT repay any money to bank of course) if they are assured that no 1099-C will be issued to them? (Bank is actually considering this since they have some culpability in the matter)

[David1980]

Not exactly optional, though not exactly enforced either I think? The instructions do include a "Who Must File". There are exceptions though. And I hear from California people that it's not required for non-judicial foreclosures where the debt is canceled by statute (as the financial institution didn't cancel the debt, the law did?) I'd check the instructions to see if there's any exception that might apply. I can't think of any.

Of course, you could ... argue that it's not cancellation of debt. The bank made a mistake, so the bank is paying the criminals the amount of money owed in exchange for the deed being signed over. (Would a 1099-MISC then be required?)