Paying back illegal debt

In late May I took out a $300 loan with Zip19. Two days later I was temporarily laid off. I work for a state University and since they are strapped for cash they laid us off for the summer. I have no reason to believe that I won't be returning to work at the end of Aug. Anyway when I found out I called all of my creditors and worked out a payment plan with them. They were all helpful....even my BofA mortgage company except for Zip19. They demanded payment on time and so I told them I would somehow find the money by the date they planned to pull it out. It ended up that I could pay Zip19 or I could pay my electric for the summer. I chose electric. I closed my bank account and revoked the wage assignment with Zip19. When they didn't get their money someone from E Care started calling me regularly. They even called my parents house and they weren't listed as references. I sent them a C&D so the phone calls have stopped but I get letters several times a week from Zip19 in Malta. They say they will sue me if I don't pay them by Aug 10th. I am in Arizona and all payday loans are illegal here so I'm not worried but can they sue me for the principle amount of $300? What if it takes me 6 months or so to pay that back? Will they put it on my credit report? They really are on the bottom of my list of who to pay back when I can. I just need to know how much trouble I will be in if they are last to be paid. Thank you for the help.