Collection agencies settle debts all the time. If you can't afford to pay the full amount, or if there is a legitimate dispute over what you owe, settling it can be a good solution.
Just make sure you get the agreement in writing before you pay them a penny. Make sure the written agreement spells out the payment and schedule that will settle the debt, and that no further amount will be owed.
Keep a copy of that letter with proof of your payment indefinitely. Unfortunately, some collection agencies will settle then will sell the balance off to another agency, and you start hearing from another agency years down the road.
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