Nothing obligates a creditor to make a payment arrangement. But nothing is stopping you from making payments anyway, which they have to credit to your account.
Now that you are being sued, you need to find an attorney in your state. The lawyer database at the National Association of Consumer Advocates is probably the best place to start looking.
Typically credit unions, and most other financial institutions, have provisions in their deposit agreements that let them "offset" a delinquent debt with any money in a deposit account. You would need to review your documentation to see if this credit union has included this right in its customer agreements. It is likely that the credit union had the right to take the funds in your checking account.
If the amount owed is less than $5,000, then you will be in Small Claims Court. The papers served on you should have a date where you are supposed to show up in court. If you attend court that day, it is typical for the court to encourage the parties to try to settle the case through mediation resulting in a payment plan.
If the amount is over $5,000 but less than $15,000, you will be in County Court, and if over $15,000, you will be in Circuit Court. In either case, it would be best if you could have an attorney represent you. Call the local Bar Association for a referral to the legal assistance program. If you cannot get an attorney, you should provide a written response to the Complaint. Do not admit anything, but request mediation to see if you can work out a payment plan and avoid a judgment.