For me to provide you with some accurate advice, I would need more details about the original handshake agreement between you and your boss, such as the loan amount you initially agreed to pay. You have a way out of this because, from your question, it doesn't seem that you and your boss agreed on the amount owed to him that you would be paying back in the first place.
This link illustrates some of the basics of negotiating a contract.
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This link provides information on contracts that are unenforceable. If even you did sign the contract over which you're being threatened (which you absolutely should not do before speaking to a lawyer), it may not hold water in court. (removed)
From my vantage point, it appears you are being harassed by your former employer and his lawyer. That being said, the fact that nothing was put in writing and your initial agreement was based upon a "handshake" could either work with you or against you. It is my understanding that oral and handshake agreements are notoriously difficult to prove in court. You shouldn't rely on that notion, though, because your former boss has a team of attorneys working for him. You don't know what their strategy is for handling this on their end.
I am in no way a lawyer. The best advice I could give you on this matter would be to take the documents your former boss and his legal team want you to sign and have them examined by a lawyer. Since you said you cannot afford a lawyer right now, this complicates things a little. Hindsight being what it is, regardless of your relationship with your former boss, your agreement to pay off the personal loans you owe should have been put in writing from the start.