If you haven't made any sort of payment to them since 1998, collection of the debt may be barred by the statute of limitations. Send the debt collector a letter, certified return receipt, telling them not to contact you again. Also, you can tell them verbally when they call you on the phone. Cite Section 805 of the Fair Debt Collection Practices Act:
http://www.ftc.gov/os/statutes/fdcpa/fdcpact.htm
Then you can ask them to validate the debt:
"(a) Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing --
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer's written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.
(c) The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer. "
Then make sure you dispute the debt, and claim that you have no liability for the debt because the applicable statute of limitations has run.
Hopefully, if the debt is really time-barred by the statute of limitations, this will make them go away. If it doesn't, you may need to prepare to be sued -- so you'll want to make sure that the debt really is time-barred. If the contract for the services took place in Maryland, it appears that the SOL is 3 years, so this debt may be time-barred -- if the state is other than MD, the answer way be different, so it might be worth discussing with an attorney to be sure.
Can they ruin my credit at this time?
If you don't dispute the debt AND don't pay the debt, then potentially yes.
there a statu of limitatios that may protect me?
It appears that you might have an SOL defense -- but SOL is not automatic, you have to assert the running of the SOL as a defense. See above.
I was advised not to pay them because if I do now they will report me and start the 7 years of negative reporting.
Actually, if you start paying now, they probably WON'T report you -- but it will start the statute of limitations clock all over again, so you don't want to begin paying unless the SOL really hasn't run.
They probably haven't put anything on your credit report because they know the debt is time-barred, and they could get in trouble if they marked up your credit on an invalid debt. But, they also know that if they can get you to make a payment or otherwise affirm the debt, then they have you. Follow the steps outlined above, and chances are they will go away.
EDIT: If, after you dispute the debt, they continue to try and collect, try posting again on this board, but do it in the debtors and creditors section for the best possible advice.
