Catalina ask password to delete user but password is always wrong
I found the solution! 

This was a user I created after the factory reset and therefore was created on High Sierra. 

macOS High Sierra has a bug around the user 501 which is the very first user you create after login: 

https://medium.com/@ambroselittle/cant-delete-original-admin-user-on-macos-high-sierra-1d79fb438246

https://discussions.apple.com/thread/8087348

So what we are going to do now is substitute the user you want to keep with the user 501 that you want to delete.
Is a bit hacky but it worked on my Catalina:


System Preferences > Login Options > Join… > Open Directory Utility…
Click to unlock it. (You may need to Enable Root User in Edit menu.)
Go to Directory Editor. Search to find the user you can’t delete — the original user that was logged in when upgrading to High Sierra.
Find the GeneratedUID field on the right and copy it somewhere safe.
Change one digit in it and Save.
Find your new/main user account > GeneratedUID, paste in the one copied above. Save.
Run diskutil apfs updatePreboot / in Terminal.
Reboot.
Login as your main user. You should be able to delete the original user now.


Strange that the upgrade to Catalina is not backward compatible and doesn't fix the issue related to previous users.