The ex-banker in me cringes at this one but as a tax preparer, it’s a great way to save a lot of $$.  When a bank writes off a debt they give you one last present in the form of a 1099-C.  The amount of the 1099-C is then added to your income.  The thinking is that you don’t have to pay back the debt so it’s treated as taxable income.  Makes sense but when you have a loan written off or written down, the last thing you probably have is extra cash for the additional tax burden.  So it’s a bit of a double whammy.  Congress in it’s infinite wisdom said that if you have some or all of your home loan written off or written down that you do not have to treat it as taxable income.  They figure you have other bigger problems.  The only goofy part is that up to $2,000,000 qualifies.  $2,000,000!!!  Do you really need help if your mortgage is $2,000,000?  Holy smokes Batman