There may be several options: (1) negotiate a settlement (2) pay in full (3) negotiate an affordable repayment plan (4) file for bankruptcy protection (5) do nothing and see if they will actually sue. If you are looking for an attorney to assist you in attempting any of these you may use the Find A Lawyer feature in avvo to locate an attorney in your area and contact them for a consultation. Which of the above is best for your situation will depend on your financial situation so you'll want to discuss more details about that with the attorney.
I am not YOUR lawyer. You should not rely on answers to questions as legal advice. For legal advice you should contact a law firm for a consultation. Tokarska Law Center 185 West F Street #100, San Diego, CA 92101 (619) 285-1992 www.sdbankrupt.com Tokarska Law Center is a Federal Debt Relief Agency representing individuals and businesses in filing for bankrutpcy protection under the U.S. Bankrutpcy Code.
You should have a lawyer take a look at the letter. If the letter came from an out of state collection agency, the odds of being sued by them are slim. If however the letter came from a local collection law firm, you most likely will be sued. Even if they sue you, it still doesn't mean you owe anything. They still have to prove the case. If you hire a debt defense lawyer on a flat fee then they can assist in getting the case dismissed or settled for a reduced amount.
If you want to avoid a lawsuit then settlement is an option but you want to make sure the entity you are paying is legitimate. It's usually not a good idea to pay any collection agency without an attorney on your side. They may refuse to give you something in writing or simply "lose track" of your payments and you get sued anyway. Also they may send you an "agreed judgment" to sign whereby you agree to have a judgment against you for the full balance of the debt, this is another trick that collectors use.
Bankruptcy is overkill at this point unless you have a bunch of debt. Bankruptcy could be a last resort if they sue you and you lose the lawsuit. A judgment is dischargeable in Bankruptcy.
You should speak with a debt defense lawyer to find out if this lawsuit threat is legitimate.
My comments are not legal advice and are for informational purposes only.