Legal Question in Bankruptcy in Michigan

1099-C and lawsuit.

A former business partner filed a lawsuit against me for $30000 he invested in our failed business. I filed for Chapter 7 to discharge this and other debts. He filed an adversary proceeding. The proceeding hasn't gone his way with the judge siding with me on most issues. The case is still pending, no trial has been set and no ruling from the judge. I received a 1099-C / cancellation of debt from this guy last week. If I claim this on my taxes can he still pursue the lawsuit? Does it really mean CANCELLATION of debt?


Asked on 1/26/09, 10:24 pm

1 Answer from Attorneys
Rochelle Guznack Law Offices of Rochelle E. Guznack, PLLC

Re: 1099-C and lawsuit.

Issuing a 1099C when debt has been discharged in bankruptcy is inappropriate. A 1099-C is simply a notice to the IRS of income lost and income gained by taxpayers and has no legal effect other than maybe to show a party's intention. It will not cancel a debt per se.

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Answered on 1/30/09, 8:41 am


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