Why not file a bankruptcy and get rid of the entire debt? I think i would wait for them to come after me and then file an answer before i settled. talk to a bankruptcy attorney just in case soemthing happens.
I don't think I would settle. There would be a number of defenses that you could muster. Talk to an attorney who handles bankruptcy, and I'd just wait to see. You may be surprised at how long it takes them to do something.