If a debt is discharged in bankruptcy, it is not treated as cancellation of indebtedness income, and it is not taxable. The IRS has provided a simple fix for the seemingly unnecessary 1099-C: Form 982. If you have received a 1099-C, you need to file IRS Form 982 to demonstrate to the IRS that it is not taxable. few words of caution: if the debt, or part of it, was canceled before you filed bankruptcy (through debt settlement or negotiation, for example), the creditor must issue the 1099-C unless another exception applies. And that debt is not included on Line 1a of Form 982, because it was not discharged in bankruptcy.