ID theft and consequence debt settlement

not sure where to start..been on here all day and actually feel a bit of relief seeing that I'm not the only one dealing with all of this stuff.
1 yr ago rec'd a letter telling me my int.rates were being raised from 14% to 32.99% due to derog.items on my credit rpt.This was from B of A. I pulled my credit and found a 1 yr. old charge-off collection from Direct TV. I do not or have never had Direct TV. Called them and found that someone used my name and social to open an acct. ONLINE and then never paid. $1000 c/o on my credit. I filled out their paperwork, faxed in a dispute and waited.During this time I rec'd phone calls from 2 different collection agencys.When I finally called them back they both told me that they had sent the collection back to Dir TV and it was in their hands. Had an atty. friend write letters with no replies.
One at a time every consumer card I had started raising my rates, lowering my limits to Below my balances and charging over limit fees and raising all of my rates to b/w 27%-33% interest. I contacted each one and explained what had happened and volunteered to sent them all the info. showing the fraudalent info on my rpt. I explained that with massive increase in interest, min.payments and fees that they were making it very difficult to pay them. They basically said "sorry, we can't help you". I continued to make these crazy min.payments until Sept.'08...my wife had major leg surgery and the money had to go there (I have 3 babies as well). Up to this point I had made NO late payments and continued to contact Citi and B of A with noone willing to help. I finally decided that if they were going to treat a longtime loyal customer this way then I'd just quit paying and let them come to me. Well 3 months of no pays have my phone ringing off the hook. With the help of my dad I have already settled with BofA...owed $61K b/w me and my wife and they settled for 14K.AFTERWARDS I found out online that they would be sending me a 1099...this was NEVER mentioned to me during the negot.A phone call to them confirmed this. I now am dealing with Citi cards...they are offering about a 50% knock-off but my dad wants to wait them out and see if we can get less.
I'm not sure what to do at this point..this would make for some major income increase that I'll have to taxes on...plus pay my dad back...if this is the case it almost seems dumb to settle with Citi.If its gonna ruin my credit for 7 yrs. why not let it go and not get the 1099?
I'm in Texas if that helps. Flustered, trying not to stay depressed over this and needing to take care of my family first.
any suggestions would be greatly received.
The total left to Citi and my wifes Chase card is about $25K.

Thanks for this site..it really is enlightening!