Sometimes corporations will write off debt. In other words, they decide not to pursue getting repaid. They do it for many reasons. Sometimes the cost of trying to collect the debt is too high or they might just want to put the debt in the past and not have it showing up anymore on their profit and loss statements. I was directed to write off millions when I worked at a big corporation.
The company is supposed to file a form with US government alerting them to fact that a certain amount of debt as been forgiven for a certain person. The government views this as a kind of income (almost as if they gave the person the money and they used it to pay off the debt). That person is then taxed on the amount of the forgiven debt.
