Your clients Timmy and Tammy likewise are asset-rich / cash-poor. But what makes them rich is their home, which is worth way more than they still owe on it. But theyve both been out of work because of the pandemic and cant pay their bills. Several of their creditors have written off their debts and sent 1099-Cs. Timmy and Tammy adamantly refuse to seek bankruptcy protection.

Under state law, general creditors cant foreclose on your house its protected by homestead laws. So Timmy and Tammy tell you that they want dont think that they have to report the 1099-C amounts because their home should be ex-cluded from their personal balance sheet, meaning (in their opinion) that yes they are insolvent. Admittedly theyre quite solvent if its included.

Your advice for Timmy and Tammy?