Do I have to pay taxes on the debt that’s discharged in bankruptcy?

Typically the filing of a bankruptcy, whether it be a chapter 7 or a chapter 13 eliminates any type of tax liability with regard to the discharged debt.  You might find that a creditor will send you a 1099C at some point after you file for bankruptcy.  However, if you contact your accountant or your CPA or your tax preparer, they will likely advise you that the debt does not have to be or that the tax on the debt does not have to be included in your taxable income because you eliminated it in your bankruptcy case.  Many creditors will simply send those statements not knowing whether or not you have filed for bankruptcy and not really caring what the tax consequences are.  It’s almost a routine motion that some creditors go through with regard to issuing 1099C’s.
You, however, should rest assured that filing a bankruptcy will eliminate the debt and it will eliminate the tax ramifications concerning your debt.  If you have any questions at all, contact your attorney, your accountant, your CPA or your tax preparer.
Now, if you don’t file for bankruptcy and there is a surrender or a cancellation of the debt, then you are responsible for the tax on that.  In that case, you must include that taxable portion in your income and pay income taxes on it.  So filing bankruptcy might be the best way not only to get out of debt but to eliminate the tax debt that corresponds to any kind of cancellation of debt by either a mortgage company, a finance company or any other creditor.
As with any type of tax issue, it is best to consult with a tax professional so that you get the best possible advice available.  If you do not have a tax professional, contact your attorney who should be able to make a recommendation for you.