I'm guessing you are dealing with a collection agent instead of a lawyer. If its in court, you need to answer the complaint to avoid a default. You can get time in court. Talk to a local lawyer to find out more.
My answer to you question does not constitute legal advice. Only an in person or telephone consultation will result in an attorney/client relationship. Call me at (313)402-0853 to discuss your matter further.
Hire a lawyer to write him a cease and desist letter, and/or call him to get things sorted out.
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Debt collectors are generally required to verify the debt upon demand by the debtor--so ask for verification of the debt. Do not assume that just because litigation is threatened it will necessarily occur (especially if you are making good faith attempts to pay your actual debt). Understand that if you are sued, court procedures require that you be provided "process"--including a copy of the complaint and a notice to appear. If you are indigent and cannot afford a lawyers, check whether there is a "legal services" group in your area that can provide assistance. Do not ignore court papers. If a judgment is eventually entered against you, ask the court for a payment plan that you can afford.
My answer to your question does not constitute legal advice, and does not create an attorney/client relationship. Please contact a lawyer directly for advice on your specific situation. Many local, county, and state bar associations provide a free lawyer referral service (check directory assistance or try an internet search for their contact information). Delay contacting a lawyer might prejudice your rights. I am licensed in Michigan but may not practice in all areas of law implicated by your question.