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Old debt - advice please

My husband has received a letter from a solicitor- Nolan’s- requesting payment of an old loan that had defaulted 5 years ago. We don’t recall getting any letters before this - this letter is quite forceful stating if we don’t pay (£12,000) within 7 days they will issue a decree which will last 20years! 

The previous week my husband had a wages arrestment placed on his wages as I cancelled a payment plan in error to repay the  arrears of council tax - they refused to stop it even though we hadn’t missed a payment and I had contacted them within 14 days of realising. 

We were previously in a poor financial situation causing numerous defaults on loans/ credit cards and council tax. We have worked hard to recover from this - no missed payments for 3 years and just starting to rebuild our credit rating. It now feels like we have taken a massive step backwards and our money mistakes will never disappear. I naively thought that as there had been no contact the debt would disappear from our credit report. 

Any advice, can you negotiate with a solicitor regarding the amount or do you just have to accept and make a payment plan? Will this negatively affect his credit score? 

We had hoped to start saving for a mortgage, Will having payment plans be seen as a negative if we were to apply for a mortgage? 

TIA

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