Allied Cash Advance in VA refuses to settle, what now?

I took out an $800 "open line of credit" account with Allied Cash Advance in Virginia more than a year ago. I paid $40 on the principal but didn't pay it off within 30 days, so late fees and interest of 360% has been piling up. Allied now wants more than $3K and has offered to stop the late fees/interest if I agree to pay $300/month for 10 months. That's impossible for me, but I talked to corporate and offered to pay $1,000 in a lump sum by the end of the year if that would be accepted as payment in full (thinking, maybe I can get this from family/friends). This was refused, but I was told a $200 monthly payment for as long as it took to pay off the total (with no reduction off the total, except interest/late fees stop) would be accepted.

My question is this -- in the original agreement I signed, it calls for mandatory arbitration and mentions the American Arbitration Association and National Arbitration Forum (or something similar). I understand neither of these are currently doing consumer arbitration.

I checked the court system online for my county and Allied hasn't won any judgments in court against people in more than 6 months (and that was just one, for less than $300).

The person at corporate is threatening to "send this outside for collection" unless I agree to the payment plan. The local person vaguely mentioned "we're going to go to garnishment unless you pay."

Is there any chance that this company will move to arbitration on this?? Any suggestions??