Just like the living debt, sometimes old debts can come back to haunt you. This is called zombie debt. The good news is that you can fight this illegal debt collection without having to pay them a penny. I tell you how in the last of my five-part series on credit.
What is Zombie Debt?
Zombie debt is charged-off or expired debt that collection agencies have purchased for as little as one cent on the dollar. Sometimes they purchase them from creditors, other times they purchase them from other collection agencies. Even though you’re not legally required to pay the debt, they will review the credit scores and histories of potential victims. They then target those who have the most to lose.
Typically, you’ll receive an excessive bill for a debt with one of three characteristics:
- The statute of limitations has expired
- It was a result of identity fraud
- It was discharged via bankruptcy or some other settlement
The collection agency will send you a letter demanding payment and threatening to sue you or add the collection to your credit report if you don’t pay up. Any attempts to deal with them will only encourage them to push harder. They’re banking on your fear of having your credit ruined, and your lack of awareness of your rights.
How to Fight Zombie Debt
First, don’t try to deal with the collection agency directly. Do not speak to them on the phone; do not offer them money to go away. If you pay them, they might decide you can pay more. If you speak to them, you may inadvertently agree that you do owe the debt.
Instead of dealing with them, take the following actions:
Verify the debt. Don’t speak to the collection agency, but do check your own records for some history of the debt. If it was charged off, you should have a record of that. If it’s an old debt, verify the statute of limitations in your state and the state where you created the debt. If both statutes of limitations have expired, you can’t be required to pay anything. The statute of limitations for most debts is six years, but it can be up to fifteen years in some states.
Write to the collection agency. Send them a certified letter demanding that they cease contact with you. Federal law requires that they comply. State that you do not acknowledge the debt in the letter.
Monitor your credit report. Often, they will illegally re-age the debt to make it appear current and restart the seven year clock. If the debt appears, dispute it with the credit bureau. If the collection agency persists, demand that they produce documentation of the original debt. In most cases, they don’t have documentation. Continuing to report a debt they can’t document is a violation of the Fair Debt Collection Practices Act. If they do have documentation, then it will most likely prove that you no longer owe the debt.
Hire an Attorney. If the statute of limitations isn’t expired, hire an attorney to negotiate a settlement with them. Contact the National Association of Consumer Advocates for a referral. If the debt isn’t valid, they can’t document it, and they continue to harass you, hire an attorney to fight for you.
Fortunately, the FTC is actively pursuing illegal collections, and has shut down some collection agencies engaged in aggressive practices, including pursuing zombie debt. If you’re the victim of an illegal debt collection, follow the above steps and then report them to the FTC.