Re: collection,credit problems

Did they agree to not proceed to judgment in exchange for your payments? At the time you agreed to pay $50/month, did the company agree that the balance you'd be paying off was the reduced payoff balance, or was that not discussed? What was the agreement about continued interest charges, and at what rate and how charged (simple or compound)?

Unless they have an enforceable judgment against you in a sum certain, I would tell the collection agency that the entire balance claimed due is in dispute, because you think they have breached the previous agreement you mention. Since they are in breach, you are now excused from further performance pending resolution of the dispute.

I would tell the insurance company this, and demand they pay the claim to you, and would stop all subsequent payments to the agency. If they sue you in small claism court, or attempt to execute on a judgment against you, I would defend myself against either/both on the grounds you set forth here, and also on grounds you never agreed that the agency could continue to add interest and late charges to the balance while you were making payments (assuming these arguments are true). On these grounds, the Small Claims court might significantly discount the remaining balance from the amount the agency now claims is due, hopefully to the amount you think is right.

If judgment enters against you as a result of small claims (in whatever amount it decides), ask the court to set up a repayment schedule (preferably w/o interest and late fees) that you can honor.