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This is a civil matter so the worst they could do is sue you and get a judgment to try and collect. So they can't file any type of criminal charges. They are trying to scare you. I would tell them that if they can't accept the $1000 per week they should sue you, but you will have to file bankruptcy so they will get nothing. That should scare them into negotiating a payment plan with you.
Make sure you get everything in writing and do not give them access to any accounts for auto-debit or they will drain your accounts.
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