Don’t Reset the Clock on Zombie Debt

What is Zombie Debt? The colorful name has been given to debt that has risen from the dead to walk the earth once again, this time in the form of scavenger debt collectors trying to get the consumer to pay an obligation that may no longer be legally collectable.

Typically the debt collection agency purchases large blocks of uncollected debt from the original creditor or other debt collection agencies for a fraction of the outstanding balance. These debts are sold cheaply because they are very old or perhaps uncollectable because the statute of limitations, the time permitted to sue on the debt, has passed.

Why would a debt collector buy a seemingly worthless debt? They hope that the debtor’s financial circumstances have changed in the intervening time and that when confronted by a debt collector, threatening legal action, the debtor will do the “right thing” and pay up. The collector has paid pennies for the debt, so anything they collect in excess of that is profit. The other thing that these collectors are hoping for is that you will do something that will restart or extend the debt collection clock, the statute of limitations, allowing them to legally collect the debt.

The type of debt these parties attempt to collect typically falls into three categories:

The Statute of Limitations has Passed. The largest category of Zombie Debt is the loan that has been time-barred by the statute of limitations; that law that sets down the time in which a creditor is allowed to sue on a debt. This can vary widely by state and it is important to know which state’s statute of limitation applies to your debt. Also, the type of debt you owe may change the statute of limitations as well, so consult an attorney.

Not Your Debt. Mistakes recording data can end up with debt that is not yours showing up in a collector’s portfolio of a delinquent debt. Also, with the high incidence of identity theft, debt that you did not authorize or incur, but which is associated with your social security number, can be scheduled for collection years after the identity theft occurred.

Debt Discharged in Bankruptcy. Unscrupulous debt collectors have been known to attempt to collect debts that have been discharged in Bankruptcy or that have been removed from your credit bureau report.

Here’s how to protect yourself when the Zombie Debt comes calling:

Beware the illegal and unscrupulous tactics used by Zombie Debt collectors. Their number one goal is to get you to make a payment, any payment, no matter how small. The reason for this is that when you make any payment the statute of limitations begins to run again and that gives them the legal right and a great deal of time to legally collect the full amount of the debt. They will use tricks like promising not to sue on the debt if you pay a portion of the debt, promising not to report the debt to the credit bureaus if you pay a portion, threaten to sue you unless you make a payment (illegal since the right to sue has been time-barred), and verbally harass you on the phone (this is illegal under the Fair Debt Collection Practices Act, a federal law).

If you believe that the debt is not yours or the statute of limitations has run out, do not pay anything to the debt collector. If they pursue you aggressively, do the following:

If they call you, don’t talk to them. You could easily say something against your best interest and renew the debt. Tell the collector to send you a letter and not to call again. If they continue, send them a certified letter with a return receipt for proof that you demand they stop calling you.

When you receive the letter, request that the collector validate the debt. You have the right to have the debt validated. Again use a letter sent within 35 days of the initial contact by the collector via certified mail requesting a receipt. The collector must validate the debt with the creditor and prove that you owe it.

Don’t make a payment. Even a token payment will in most cases reaffirm the debt and make it legally collectable.

Don’t admit verbally or in writing that you owe the debt.

If you get sued, don’t ignore or avoid it. If you can afford an attorney get one; if not contact the court and get advice on how to appear pro se; that means representing yourself and filing an answer within the allowable time. Many attorneys taking the case for collection agencies are not aware that you may have a statute of limitations defense and will back down in court when presented with it.

Keep a close eye on all 3 of your credit bureau reports. Zombie debt collectors like to illegally report an old debt to a credit bureau. If that happens, contact the credit reporting bureau and challenge the debt or get help from a reputable credit repair agency that can challenge that debt and any other out-of-date or erroneous information contained in your report. Getting these entries off your report is important and can result in an improved credit score.