It depends on when the Creditor issues you that 1099-C. Generally if you fail to pay your credit card or an unsecured debt the financial institution writes off the debt, and they have 10 years to issue you a 1099-C for the debt that was forgiven. If the creditor fails to issue you a 1099-C within the 10 year state collection statutory period, then you do not have to include the discharged debt on your tax return.
There was a recent Tax Court Summary Opinion 2012-46 that addressed this issue. A credit card company forgave a debt and never issued a 1099-C. It then sold the debt to a third party collection agency ten years later which then issued a 1099-C to the debtor. The Tax Court held that the debtor did not have to pay income tax on the forgiven debt because the state collection statute had expired.
In addition, no income tax is due if you are insolvent at the time of the discharge such as if you file for bankruptcy. You can exclude the cancellation of debt income on IRS Form 982.
If you have any questions please call Gregory Spadea at Spadea & Associates, LLC in Ridley Park at 610-521-0604.