Section 16.7 Contested Liability Doctrine

• Library: Bankruptcy Practice (2007 Ed. + 2015 Cum Supp)

1. (§16.7) Contested Liability Doctrine

If a debtor and creditor have a legitimate dispute regarding the amount of the debt outstanding or whether it is, in fact, owed at all, any settlement of the obligation will not result in discharge-of-indebtedness income. See, e.g., Preslar v. Comm’r, 167 F.3d 1323, 1327 (10^th Cir. 1999). This rule, commonly known as the contested liability doctrine, rests on the premise that, if debtors and creditors settle on an amount for a disputed debt, there is, in fact, no...