1099-c's do not make something income. They make it reportable. You report it, you report you are insolvent, then guess what... the IRS doesn't tax you. So, since this post and many responses are based on the premise that this hurts poor people without assets, how about you address the fact that it doesn't. I'll guess why you don't, because you didn't know that it doesn't.
Was there a post accusing someone of filing false 1099-cs? The penalties for that are incredible.
Your comment that people should be allowed to make loans at no interest and discharge any interest has no merit. Once again, consider how wealth transfers would occur from every single family if that were actually possible. You've effectively made many other taxes null and void, and you don't even address the issue. You can disagree with those taxes, but you pretend that it's one "neighbor" loaning another money (which never even happens in the real world BTW, how about a real example).
What does happen is rich people use your ideas to avoid a half dozen taxes, which is the real reason you don't acknowledge why your idea doesn't work. You pretending one goodly neighbor is hurt by $250 assumes your goodly neighbor filed a 1099-c in the first place. The chances of your example occurring in the real world are 1:10,000T. On top of it, your example also says the person can't pay and is insolvent. You don't even know they aren't taxed if insolvent.
So, stop spreading misinfo.