Debt Collection after 1099c

I have several questions that go different ways. Guess it all started with a repo I had in 2002. Well a couple weeks ago I was informed that I now have a garnishment of wages through my employer. It turns out the Original creditor sold my debt to a scum Credit collector called Kelkris Asoociates. In 2004 Kelkris filled a lawsuit. They now claim they served me at my parents house, but I never received any paperwork. I asked my parents and they did remember the guy asking for me, but my Father told him I dont live there. The guy left and never dropped any papers behind so up until now I never knew what this was for. So obviously Kelkris won the lawsuit. And now 4 years later is garnishing my wages. Now the part I dont get, I received a letter from the I.R.S. that I owe back taxes from 2006. The original lender Travis Credit Union filled a 1099-c Cancellation of Debt and Forgiveness. I now have to declare this as income. I contacted the I.R.S. and according to the lady on the phone she said once they file this paperwork they can no longer persue this debt because they found it to be "un-collectable". Which is fine, I owe the I.R.S. money but yet the scummy collection company still continues to collect? HMMMM...?? Well I contacted an out of town lawyer I know and he says they can, but they cant... Depends on the Judge I suppose. But obviously the question of summins becomes and issue. Also he says that they cannot sue me in another county. They sued me in another county I do not and have never lived in. The original finance company was here, not in the other county.

So the questions :lol:

Can a debt collector still continue after the 1099?
Wouldnt that be double whammy for them?
Is the lawyer right, about suing in another county?
Anyone know a decent attorney in Merced County? Cali.
What actions can I take to stop this?