Guidance please?

Here is my situation.

I lost my job back in July of 2008. I am now a substitute teacher which is a contract employee position. I am not guaranteed work nor do I receive benefits of any kind. I am in my second year of substitute teaching. I bring in an average of 500 dollars a month. If I am fortunate enough to earn "extra," it goes towards bills from previous months. I do not get paid for holidays, either.

I currently owe Capital One about $1700. I started getting calls from collections back in February. They were really horrible. They told me I needed to make a payment of at least $100. When I told them I was willing to try to do that, they said that my account was going to be charged off four days before I got paid and that was unacceptable. There was nothing they could do to help me.

Next thing I know, I'm getting calls from Nelson, Watson, & Associates. I told them I couldn't pay anything and told them the same thing I posted above. I have been calling them back when they ask me to and I have been answering their phone calls. I have been dealing with a Mr. Campbell.

Now I have done a lot of research on this site before I decided to post for myself. Some of the things that are occurring to others, are happening for me as well. There is some other stuff I need help with, though.

Mr. Campbell said that they had a hardship program that I could be enrolled into. He told me to fill out the application. He said that way, they would at least be able to see I couldn't pay and my debt would be considered unable to be collected. I told him, okay.

I got a call from someone the next day and he said there was a "red flag" on my account and he didn't know what it was for. He said he would call Capital One. When he got back on my line, he said the particular department he had to contact had closed for the day and they are only open until 4:30. He told me to call back the next day. I was unable to because I got held over at school.

So, today I get a call from NW&A. Once again, I answer the call and I am told by Tricia that Capital One would accept my hardship application only if I applied a down payment and they need to know how much I can put on the table in order to find out what parameters they will set up for me. I told her that's not possible. She forwards me to Mr. Campbell who proceeds to tell me they rejected my application and I owe them 1700 dollars, so what could I pay? I told him I could do 25 dollars a month. I'm about to be out of a job (summer break, school will be out) and that if nothing more, that amount can realistically be conjured up even without a job. He said that he could make no arrangement with me for that little, that even if I sent in a payment for that amount they would have no choice but to apply it to the balance, but it would not guarantee I would not be taken to court. He said he needed a promise of at least 50 a month from me. I told him I couldn't do that and I was about to be laid off from my job. He told me to set it up and make what payments I could and then when I was unable to do that anymore, to tell him and they would stop the payments and we'd deal with it later. He also told me that if the took me to court, which I told him to go ahead and let them because I am worthless, he said that a court judgment could follow me into my future and that they could garnish my wages when I started earning more money in the future. He said that if I was taken to court that anything decided now could affect me in the future if it couldn't be applied to me now.

Just wanted to add that sounds extremely shady to me, as does the red flag thing, telling me that he would stop the payments (who does that?!) and then changing the requirements for the hardship application. I think the hardship "application" was just to get more personal information out of me.

I didn't feel comfortable giving out my banking info to these people, so I told them I would call them back on Monday. I plan on getting one of those pre-paid debit cards to handle any payments to them as I don't trust them one bit. Can someone help me make heads or tails out of this please?

Also, I have been reading about debt validation letters. I am tempted to send one, but if they do validate (and I saw on the boards where it said they DO validate) don't I owe the balance in full at that point? I am unable to do that. Help? Thank you ahead of time and sorry for the long post.