I have been contacted by a collection agency who wants me to settle a dept. They ask for half to settle debt. I told them that my wife and I don't have the money that they are asking so they said they will sue us. I don't want to get sued but I don't have what they are asking.

Sorry but you don't have much choice. If this is a valid debt, then you try to negotiate a settlement or they file suit. Then they get a judgement and they garnish your salary and/or attach other assets.