Received A Letter From My Neighbor Asking Me For $20k Or They Will File A Suit With Small Claims. Is This Harassment?

Background: my neighbor and I got in a fight several months ago. They hit me, I hit back- that was the end of the fight because we were pulled away from each other. The cops came, we both didnt file for charges and no one got arrested or cited that day. They escalated it the county (CA resident) and there was an attempt to charge me for battery and the judge dropped it with the agreement we stay away from each other. I dont have a criminal history so i am assuming thats why it was also dropped.
I dont think my neighbor liked that the charge was dropped and in addition I didnt have to pay them anything. I received a letter from my neighbor saying I owe them $20k due to xyz and if I dont pay by a certain date, they will file with small claims court.
I am over my neighbor and just wish they would leave me alone. I wish moving was an option but I dont have the financial capability of doing so. The stress over the initial case was enough for me to enroll in therapy and I have been closely monitoring overall health, but Im not over here charging them for my sessions. Im ignoring the letter because 1. apart of the agreement was for us to stay away from each other and 2. this has to be a joke right?
I feel like I cant catch a break. Would this letter be considered harassment and a form of extorsion? Do I have to find a lawyer to prepare for when they do file it?
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