Debts may be canceled in a variety of ways, including through negotiations between the creditor and the debtor, debt relief programs, and personal bankruptcy. Debts forgiven by a creditor are generally considered taxable income. Canceled debt will typically be reported by the creditor to the IRS and to the debtor on a 1099-C form.

To get out of debt, start by creating a list of everything you owe. Then, look for ways to adjust your budget in order to free up funds to put toward your debts. Consider additional resources, such as credit counseling or debt consolidation.

There are two main options for debt cancellation: bankruptcy and debt settlement. Each of these options works in a different way, but they may provide you some relief if you’re facing financial difficulties and are finding it challenging to keep up with payments.

Debt cancellation can happen via debt settlement, where you negotiate a reduced balance with your creditor," she said. "It can also occur when debts get discharged in Chapter 7 bankruptcy." Educational debt can also be canceled through various student loan relief and forgiveness programs.