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Your wife must file an answer to the complaint (if she does not, the creditor will get a "default judgment" for the entire amount they seek).
Once an answer is filed, she will be in a better position to negotiate a settlement.
See this link for general steps on how to defend a debt collection suit: http://www.creditinfocenter.com/debt/debt-lawsuit.shtml
For help with tips on negotiating a settlement:
When trying to settle a debt, creditors generally prefer lump sums over payment plans. They are often willing to accept an amount less than the full debt (the trade off is that they get a quick payment and don't have to worry about ongoing collection costs or administration). If you do not have the ability to offer a lump sum for something the creditor will accept (some will accept a small portion, while others want close to the full amount), you can try a payment plan, these are less satisfactory to the creditor (especially if they have a lien on your property already), but if you are willing to offer something with a reasonable chance to get the creditor a large amount of their debt back, you are likely to get them to accept it.
Whenever working with a creditor, make sure that you keep your communications in writing (if you speak to someone by phone, promptly send a confirmation letter to summarize your conversation), as this will help to ensure that there is no confusion later on, and you will be able to enforce your settlement against any future collection efforts.
What would I include in the answer and how in what form would I submit it. and would I go to the court in the next county. Being they have the wrong county will they be able to resubmit it in our county at a later time?
They have the wrong "venue" by filing in the wrong county.
Your wife (remember, your wife is the named party, not you) has 2 (really 3) options here:
Option 3 is generally best.
Once the action is properly filed, she still needs to file an answer (use the link I provided above for more detailed help with this, as well as your county law library.)