I remember back when I had to do a short sale on my house, and the lender wrote off part of the debt, IRS rules said forgiven debt is treated as taxable income to the debtor, and I got a 1099 for the ~ $40k that was written off. So 1099'ing the debtor might be a requirement.
If this were me and it were "only" $1000, I'd probably avoid the hassle of dealing with the paperwork, and 1099'ing the recipient, since the tax savings on a $1000 deduction/loss isn't going to be much anyway.
Unless the debtor really pissed me off and was a deadbeat, in which case I probably would 1099 him just to spite him.