Most of the advices here are accurate, in my experience. Couple things: GET ON THE PHONE NOW.
Call the original creditor, and speak to someone who has juice. If you pay them directly, then a) you're back in their good graces for next time, b) you don't pay any fees for the "collection" (which are bullshit, but it's a practical consideration to pay them to be done with the whole thing), and c) you might even be able to use flex, and you might still have any tax benefits you had before it went to collection.
If they say that they've sold it, and it's out of their hands, call the collector. el Barto is right about the "good cop/bad cop", but having done this three or four times (don't get divorced), I can tell you that they want their money cheaply and quickly more than they want to fuck with you. The collectors CAN report you to the credit bureaus; it's my understanding that it's not "illegal" in and of itself, but there are rules. They have to give you time to pay it, even after it goes to collections, and if it does get reported, it has to be removed once paid in full (not reported as "settled", but removed outright).
Bottom line, CALL THEM. I know it's money out of your pocket, but the best way to avoid hassles (illegal or not, try fixing your credit once it's wrongly reported...) is to be proactive about it. They want, in this order, "lump sum", two or three equal payments over two or three months, or a monthly payment. They'll take your word as to what you can pay, as long as you are paying it.