Most lawsuit proceeds are taxable, and the payor will likely require you to send them a W-9 so they can 1099 you for the amount of proceeds. The proceeds may go to your lawyer, who is only taxed on their share of the money, just as you're only taxed on your share.
None of this has anything to do with your debt and your repayment. Your lender should report any interest on this loan as income.
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