My sister and husband got a divorce and they owed 130,000 in NC on
their home which was foreclosed. The home has been sold at auction.
When can she expect to get the 1099C from the IRS. They paid all the
taxes due the county.

The IRS does not issue 1099C's.  
If the home sold for more than was owed on it the mortgage holder
would forward the excess proceeds, less expenses, to the owners. If
the home sold for less than was owed on it then the owners still owe
the mortgage company for the difference.
If, and it is a big if, the mortgage holder canceled any debt, the
owners might owe tax on the forgiven amount, as it probably would be
considered income.

The real question is, why do divorcing couples allow a home to go into
foreclosure rather than selling the home and then spliting the
proceeds?  Avoiding all the hassle of bad credit reports, foreclosure
sales and unforseen tax consequences.

Joe,
Although Daniel's comment seems correct to me, you should read the
disclaimer below advising that no information posted here is legal or
professional advice, even if it is posted by person's who are
obviously professionals or lawyers.
Greetings, Myoarin

Thanks for both of your answers. The house was abandoned because they
both owed too much on the mortgage, and neither could afford the
monthly payment. So they let it go into foreclosure. They purchased
the place for 108,000 and took out a home equity, bringing the grand
total to 130 K. now the real kicker. My sister bought a townhouse for
110,000. (0 down) and is paying 775.00 a month. If the IRS comes after
her for the unpaid balance of the forgiven debt, she will be
foreclosed on again. Their old home was sold for 60 K, leaving them a
potential tax bill of whatever the IRS says they owe on 70 K. Your
comments are appreciated.