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OK - let's separate two things - getting a 1099 and it being taxable income. Just because she gets a 1099 doesn't mean the income is taxable. In fact, she probably WILL get a 1099 even if it's NOT taxable.

It is not necessary for her to file bankruptcy to make any Cancellation of Debt (or COD) income not taxable. She can use the provisions of the tax code in the link Phil gave.

But...even if the 1099 is not taxable, will the forgiven debt be counted as income?

I have not a clue if the BK attorney is good or not, attorney is with a big group that specializes in BK. That is all they do. The sad thing is she is an accountant, but not at all well versed in tax law and in her situation she cannot afford both BK attorney and CPA. Therefore, I am trying to scrounge up information for her.

Thank you!

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