medical bill, possible collection

medical bill, possible collection

There was a mistake in filing or something or this sort with my insurance/ hospital and i ended up with a $500 bill without knowing about it for quite a while. The insurance company wants it paid before it files a claim. I talked to the collection people today and they said they can give me until thursday to decide, or they will "write it up as a bad debt". There is no way i can pay up front. I can, however, pay it off in three installments by july 3rd. Should i try contacting the original creditor? Negotiate with collection people? Call the insurance again? edit - and also - is this terrible for my credit? Help :( Thanks
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