Hello, and thank you for your question.
Regarding collections of a debt from the US, the debt is owed to a private company, and not to the government. As such, the remedy to collect an unpaid debt from an employer is based on the law of the location of the employer. For example, if you lived in Texas, it is not possible to garnish a wage of a Texas employee except for government-type debts, such as child support or federal tax
debts. However, if you lived in Indiana, the same debt could be collected from a wage garnishment in that state.
The ability to garnish wages in the Netherlands is based upon similar concept. First, is it LEGAL to garnish the wages of a worker in the Netherlands for a private debt? (I don't know the answer to that one), and second, is it FEASIBLE for the debt collector to go enforce the collection out of the US. For that answer, I would say it is highly unlikely that a company would go through that effort unless the collectible debt is in the millions of dollars.
Regardless of the legal ability or the feasibility to garnish your wages in the Netherlands, it is mostly a moot point--in other words, nothing to worry about. This is because once the bank has "written off: the debt as uncollectible and sent out a 1099-C, it is effectively stating "we cannot collect this debt and we are writing it off as uncollectible". In order to do this, the company gives up its right to collect the debt ever again.
As for the second part of your question, once a 1099-C is issued, is it income? The answer is, YES, it is income. But the second part is "is it TAXABLE income
?" The answer to that is less clear.
Under US Tax law, the forgiven debt is not taxable if one of the two conditions are met: 1) If the foreclosed property was your MAIN RESIDENCE and you were foreclosed because the value of the property dropped below what you owed on it and you could not sell the property for what you owed, and/or 2) the income is not taxable to the extent that the canceled debt exceeds your net worth. In other words, you were financially insolvent.
Regardless of the case, you must file a tax return to show the income and then if one of the exception applies, you must tell the IRS which applies and to how much of the debt is NOT taxable.
So, at the end of the day, NO, the bank will not come to the Netherlands to collect the debt, and you will need to file a US Tax return if a 1099-C was sent to you, but you MIGHT NOT have to pay tax.