creditor trying to fill "agreed judgment entry" for negotiated payment plan

A creditor filed suit against me over an unpaid loan and I am working with a debt mgmt company to negotiate settlement. The account was not even 90 days past due yet when the suit was filed. My response to the suit is not due for another couple weeks, but the negotiator reached a verbal agreement for a downpayment and on-going payment plan to settle the account.

I thought this meant they would drop the lawsuit, but they have sent me a form describing the plan as part of a "Agreed Judgment Entry" they want to file to settle the case.

My downpayment more than brings the account current and the agreed monthly payments are more than those I was previously required to make under the original agreement. Why would they need to enter a judgment against me under these conditions?

I'm assuming this judgment will have a lasting negative impact on my credit report, is that correct? Should I just make the payment to bring the account current and file a response to the suit saying the account is current now? Can they still obtain the judgment anyway?