I'm about to settle some debts. I'm reading of nightmares in dealing with scavenger debt collectors. Once trick they appear to be pulling is not reporting principal correctly on 1099-C forms and attempting to shift their own taxable income onto the consumer.
For example: You owed $1000 in credit card balance. Scavenger tacked on years of fees and interest bringing the total to $2100. If you settle for $300 then you should own around $210 on $700 forgiven income. Some of them are instead reporting that $1800 was forgiven, which would make your tax liability around $540. All of this is probably illegal in consumer and/or tax law, but Junk Debt Buyers have shown little interest in complying with the law.