When canceled debt is jointly held by both spouses:

Each spouse will be responsible for one-half of the canceled debt, and they will each complete an insolvency worksheet with all of their separate liabilities and assets only.

They may choose to file married filing separately, as this may provide a greater reduction of canceled debt income.

A single insolvency worksheet can be completed showing all of their liabilities and assets.

Each spouse will be responsible for one-half of the canceled debt, and they will each complete an insolvency worksheet with one-half of their joint liabilities and assets.