2nd mortgage Charge Off/1st Current

I currently have a 2nd mortgage that has been charged off and it shows up on my credit report as so. I was working with the 2nd mortgage company to try and get it back on track and they had me send in a lot of financial paperwork and they said that it would take some time for them to get to it because they were really backed-up with the volume of loans that they were working with. I called every month to check on the status of our application and each time they said they were still working on it. The 3rd month that I called they told me that the loan had been written off. I've made a couple of payments to the 2nd mortgage holder but the receipt that I get back from them does not show a balance or anything just that they received the payment amount. They would like for me to settle but I'm not in a position to settle for a lump sum payment. I owe $30,000 on the 2nd and the representative from the 2nd mortgage company says that he has seen cases like mine settle for 10% of what I owe, not sure if that is true or not. I could pay $3000 over a 9-12mo period but not a lump sum. Also, what happens if I claim the $30,000 that I owe on my personal taxes even though I havent received a 1099 from the mortgage company? Any help would be greatly appreciated.