A creditor may report any cancelled/settled debt amount over $600 to the IRS and you may be required to report this amount as income on your tax return as the IRS considers forgiven debt as taxable income.  If you receive tax documentation from one of your creditors, you may want to review it with a tax professional.  IRS Form 982 allows certain hardship situations to be exempt from this forgiven debt tax and a tax professional will be able to discuss those details with you further.

Did this answer help?