Hi Constantine,
This sounds like a very confusing situation, but it is actually the result of a specific security feature. The exact sequence of errors you are receiving—getting "this account doesn't exist" when logging in, and "that account already exists" when trying to recreate it—confirms that your email address has been deleted as the account's primary alias, or the account has been permanently closed.
This usually happens for two main reasons:
Account Hacked (Most common): Someone gained access to your account, removed your email address, and linked their own email address to the account instead. The moment they removed your original email, it was permanently deleted from the system.
Inactivity: If you haven't logged into the account for a long period (usually 2 years), Microsoft automatically closes and deletes it.
Why does it say "Already Exists" when making a new one? When a Microsoft email address (like @hotmail.com or @outlook.com) is deleted, Microsoft permanently "locks" that specific address. They do not allow anyone to reuse or recycle it to ensure no one else can intercept your old emails or gain access to services linked to that address. Because the name is sitting on their permanently reserved/blocked list, the system throws the "already exists" error when you try to register it again.
Unfortunately, once an email alias is deleted, there is absolutely no way to recover that exact email address or create a new account with the same name. You will have to create a brand new Microsoft account with a completely new email address.
Since you mentioned that you tried logging into another account you had and ran into the exact same problem, this is a very strong sign that your accounts were targeted and hacked. I highly recommend that you immediately change the passwords for all your other important accounts (banking, social media, etc.) and enable Two-Factor Authentication (2FA) everywhere.