Anytime a lender writes down their borrower’s debt to accommodate a settlement they are required to report the amount of the write-down to the IRS and it can be considered income to the borrower. Treated as income the written-down amount becomes taxable and would need to be reported on the 1040.
The type of account, whether it be a revolving charge or installment credit, doesn’t matter. Either can become taxable income when written down. So, while the lender may be forgiving when prudence commands, the tax collector will have his way, unforgiving to the end.