Ask Terry Questions Cancellation of debt after death

Cancellation of debt after death

By Terry Savage on February 22, 2020 | Credit/Debt

Hi! What is your experience with cancellation of credit card debt after the death of a person with a surviving spouse who will file MFJ for the tax year? Is there a time limit for the company to send a 1099C?
Thank you!

Terry Says

Were you a co-signer to the card? If not, the debt is not yours. And credit card debt is unsecured. So it will be written off — even if you file a joint return. Now, I think you’re asking if the card issuer will send you a 1099C — relating to CANCELLATION of the loan balance that was forgiven. Creditors that forgive more than $600 in balances are required to issue this form.

Here’s a link to an article explaining in detail. Just don’t ignore this form, because it could result in penalties or an audit for not fully disclosing — and paying taxes on –income!

Now, if you were not a signer on the card, and it cannot be reasonably considered your debt, and if you were not filing a joint return, it might be possible to ask for this to be excluded from your income. You need professional tax help to figure out if any of these exceptions applies — and if the amount is not large, it would just be easier to include it on your own return and pay the taxes.

Recent Credit/Debt Questions

money

ASK TERRY

a personal
finance question