You have to report the income on form 982, but you may meet one of the exclusions available for bankruptcy, insolvency, or qualified principle residence debt. For a HELOC to meet the requirements for qualified residence debt exclusion you must have used the funds to acquire, construct, or substantially improve the home. Bankruptcy is pretty self explanatory. Insolvency exception applies if you had more liabilities than assets right before the debt was forgiven and only applies to the extent you were insolvent. For example if you have 24,000 in debt and 10,000 in assets only 14,000 can be excluded for insolvency.