A CONCERN that is growing rapidly is the cancellation of mortgage foreclosures.  Although these are leading causes, they are not the only ones; cancellation of debts could be from consumer debts, bank and finance companies as well.

Generally, if a taxpayer owes a debt, and the person or business holder of the debt cancels or forgives it, the taxpayer must include the cancelled amount as income on their tax return.  Cancelled debt is treated as income because the taxpayer received the benefit of the debt, but did not also carry the burden of repayment.