If the letter is from a lawyer, contact the lawyer and offer 60% to settle, if he does not take it, slowly walk up to the original debt.
Do not admit that you have it right now, but will take a couple of days to get. The reason for contacting the lawyer instead of the original creditor is that the lawyer will operate within the law unless he is stupid.
If the letter is from a collection agency, contact the original creditor and do the same thing, but start at 40%.
If all else fails and you wind up dealing with the collection agency, do not accept any of the penalties. If it is a collection agency, and there is truly a court date, then they have to give you all of the information for the court date to include the name and contact info of their lawyer.
The good news, if it does go to court, the judge will issue a payment plan and the creditor, collection agency, etc must accept it. If you walk into court with a certified check for the $5k, they will generally accept it and then put you on a payment plan for the remainder. The bad news, the judge can add ‘reasonable’ court costs to your judgment. Also, if you no-show the court case, they can claim they cannot contact you and ask for wage garnishment.
Don’t offer up front. Ask them what can be worked out, if anything. Avoid you telling them, they will try to get what they can. So you saying upfront I have $5000 will cost you at least $5000 when they would have accepted $3500. However, now that it has gone to a suing point, I didn’t get as good of a settlement as I did working with them before the court date was actually set. So You say something like I have XX amount of $$ now, even though you have $5000, they’ll say, oh I can’t accept that, then you ask what can you accept?? If you can come up with it, great!! If not, they’ll tell you sorry, we’ll see you in Court. Where you will have Court Costs and the balance and interest.