OUIVORY 10,DUU. 2 Question 6 of 50. An individual who is not personally liable for a debt does not have ordinary income from the cancellation of the debt unless the individual Retains the collateral. Retains the collateral and the lender offers a discount for the early payment of the debt. Returns the collateral to the lender. Returns the collateral and the lender agrees to a loan modification, reducing the principal balance of the debt