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Dear Oxnard, California:
Can you tell me, procedurally, what is happening with this matter? Is it in small claims court? Have you been served with a Summons and Complaint, and been given 30 days to answer? Or has a judgment actually been entered?
Usually, what a creditor will ask you to do in this situation is enter into a "stipulated judgment" that you do owe the money, but agree to accept payments until the amount is paid off. In turn, they will not record the judgment if the amount is paid off as promised. Make sure that the monthly payments are something you can actually afford, and do explain that you have been ill. Although collection agencies are often difficult to deal with, the people that work for them can be sympathetic to a true illness.
Sometimes, they will want interest. In California, the statutory interest rate on a judgment is 10% simple interest.
If you are able to offer the creditor a large lump sum, they may accept that as payment in full and dismiss the lawsuit. If you do have money available, I suggest trying this. Start with offer about 1/3 of what you owe (around $700) and see what they counter-offer with. It should be something less than you actually owe. The reason they will agree to do this is that collection agencies generally purchase a debt for a small percentage of the actual debt. If, for example, they purchased the debt for 10% (about $232) and you can pay them $700 without them having to do something else, that is all profit to them. If the collection agency agrees to this, expect them to ask you to pay the debt right away, and probably by cashier's check.