It is not entirely clear. Who lost? The Class Action lawsuit was dismissed? If so and you were forgiven $14,000 they may send you a 1099-C which results in a phantom income of $14,000. If indeed they do send it to you you can file IRS 982 form to demonstrate that you were insolvent. So, do nothing until and unless you receive a 1099-C and if you do find an accountant to help you fill out the IRS 982 form.
With the only income of $4,000 I doubt you are required to file a tax return but ask a tax preparer.
Sounds as if you received a Form 1099-C for Cancellation of Debt. A creditor is required to send you a Form 1099-C whenever $600 or more of a debt owed is forgiven.
You will need to pay taxes on that income unless you fall into one of the exceptions established by the IRS, and requires the use of the little-used Form 982. This form is used to determine under certain circumstances the amount of discharged indebtedness that can be excluded from gross income.
Under the Internal Revenue Code, the amount forgiven is excluded from your gross income and, therefore, not taxed due to:
You discharged the debt in a bankruptcy case;
You were insolvent when the debt was discharged;
The debt was a qualified type of farm or business indebtedness; or
The debt was a qualified type of principal residence indebtedness.
It sounds from your question as if you may have been insolvent at the time of discharge of the debt.
To show that you are excluding canceled debt from income under the insolvency exclusion, attach Form 982 to your federal income tax return and check the box on line 1b. On line 2, include the smaller of the amount of the debt canceled or the amount by which you were insolvent immediately before the cancellation. You can use the Insolvency Worksheet, later, to help calculate the extent that you were insolvent immediately before the cancellation. You must also reduce your tax attributes in Part II of Form 982 as explained under Reduction of Tax Attributes, later.
You're going to have to sit down with a tax professional to make sure you claim the proper exclusion, though. Don't take this short answer as your tax advice.
I'm a lawyer admitted in California and New York with offices in Pasadena (CA) and New York City. I'm not your lawyer unless we enter into a written agreement. For questions about this or anything else, call 866.787.8078.
The best advice already given is hire a tax professional in your area to prepare your return. This is a complicated area of work.