I kow there are other posts here covering this topic, but I wanted to share what I have recently learned.
Some facts we all probably know: The cancelled debt due to a settlement will be reported to the IRS and will be considered as income for you. However, if you are considered to be insolvent (more debt that assets) at the time of settlement, the amount can be reduced or even eliminated. For example, if you determine you are insolvent by $20000, you can have up $20000 of cancelled debt and not have to report it.