Question: If a debt I owe is cancelled, is that income to me?
Answer: Cancelled debt is includible in income unless it is specifically excluded by some provision in the tax law. Certain types of debt forgiveness are generally excluded from income (e.g., discharge in bankruptcy under Title 11, a discharge when the taxpayer is insolvent outside of bankruptcy, qualified farm indebtedness, and qualified real property business debt).
Under special circumstances, some types of student loan cancellations are also excludable from income.
