Financial Q&A: Money Tips for Couples and Families

Money Girl answers 3 questions about family finances, including saving for college, using joint accounts, and co-signing loans. Plus you'll get a bonus Q&A about using credit cards with the newest technology. 

Laura Adams, MBA
9-minute read
Episode #412

When a lender cancels all or a portion of your debt, they send you Form 1099-C, Cancellation of Debt, to submit with your tax return. However, since Rose is a co-signer and her daughter is the primary borrower, she should be off the hook.

Tax on the canceled debt only needs to be paid once, by the person who used or benefited from the money. So the lender should only send the 1099-C to her daughter. But if Rose does receive a 1099-C in error, she should contact the lender and ask them to correct the mistake.

However, there are exceptions when a forgiven or canceled debt is not taxable, including insolvency. This is when your liabilities exceed your assets in an amount greater than the forgiven debt, prior to the cancelation. If Rose’s daughter is insolvent, she would not have to pay tax on the amount of forgiven student loan debt.

You can use the worksheet in IRS Publication 4681, Canceled Debts, Foreclosures, Repossessions and Abandonments, or consult with a tax accountant to determine insolvency.

See also: The Statute of Limitations and 4 Options for Old Debt

How Do the New Chip Credit Cards Work?

Bonus Question: Melissa D. asks, “I just listened to your podcast about chip credit cards. It was especially interesting to me because I just moved the UK and I’m dealing with the lack of chips on most of my cards. Does the presence of the magnetic stripe on the new chip cards mean that static information is still there—or is there any extra security because of the chip?” Free Resource: Travel Card Comparison Chart (PDF download) - Laura compares the best no-foreign transaction fee credit cards!


Credit cards with magnetic stripes still contain your static account information, even when they also have an EMV chip. However, that magnetic data is only accessed when you make a purchase by swiping through an old-school terminal.

When you use a chip card with an updated terminal, it doesn’t use the magnetic technology, so that static data in the stripe is safe. You’ll know that you’re using a chip terminal because you have to dip your chip, or insert the card into the machine and leave it there during the entire purchase.

Magnetic and chip technologies are completely separate and don’t share any information during a purchase. Having both a chip and a magnetic stripe on a credit card doesn’t give you enhanced security when you swipe it through an old-school terminal. You only get enhanced security when you check out on an updated chip-and-dip terminal.

If you're ready for help managing debt, building credit, and reaching big financial goals, check out Laura's private Facebook Group, Dominate Your Debt! Request an invitation to join this growing community of like-minded people who want to take their financial lives to the next level.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.