If a creditor already has begun the process of suing you, it may not accept payment arrangements without a concentrated effort on your part. You're at a disadvantage because the credit card company or collection agency knows that even if you don't have much in the way of assets or a steady job now, the odds are you will in the future. Depending on the state, judgments are valid for up to 10 years and can be renewed.

Original Creditor or Debt Collection Agency

It's important to figure out who is suing you. An original creditor is the bank or company that you applied to for the credit card. It owns the loan and most likely has all the documentation it needs to prove that it's your account. A debt collection agency that has bought the credit card account from the original creditor isn't in as strong a position. In most cases, all the agency has is a computer printout of the accounts and a sales document from the original creditor that doesn't guarantee the computer printout is accurate. It's like a total stranger coming up to you and saying you owe me money. You may have owed the original creditor, but how do you know that the agency bought your specific account? That's where you have some leverage in negotiating.

Put Your Head in the Sand and You'll Lose

It's scary to be served a summons to court and the complaint from the creditor, but it's not the end of the world. Don't do anything, and the creditor gets a default judgment, in other words, it wins because you didn't fight back. When the creditor gets a judgment, there's little motivation for it to come up with payment terms. The judgment gives the creditor the ability to garnish your wages, levy your bank account and take your personal property, including your car or motorcycle. Fighting back means replying to the summons and complaint per the court rules. You have a limited amount of time with which to respond, and it varies by state. Once you have responded, you can start to negotiate payment arrangements.

Court Wants to Clear Its Calendar

The court would prefer that you and the creditor or agency come to an agreement rather than going through with a trial. That gives you some negotiating power. Sometimes the judge will ask you and the creditor to leave the courtroom and attempt to come to terms. That may happen at the pre-trial conference, or the attorney for the creditor or agency may call you a few days before the trial for a settlement. Now, you may think that discussing payment terms is admitting you owe the money to the creditor. That's not necessarily the case. As long as you negotiate the terms without admitting you owe the creditor, you're on safe ground. Lots of people -- celebrities and sports figures included -- will negotiate civil suits without admitting they are at fault.

Stipulated Judgments Are Binding

So you've come to payment terms with the creditor, and it gives you a document to sign that says it's a stipulated judgment. It's a legally binding judgment in which the creditor has agreed to accept payments from you. As long as the payments are made, the creditor has agreed not to pursue other collection activities. That means if you miss a payment or are late by even one day, no matter what the reason, the creditor can record the judgment and go after your assets and garnish your wages. The good news about a stipulated judgment is that it doesn't go on your credit report unless you breach the agreement. In that case, the creditor records the judgment, and it dings your credit history.