What is Zombie Debt?
Zombie debt is old debt that is typically written off as bad debt by the original creditor and then later sold to collection agencies for pennies on the dollar. Most of the debt sold is years old and cannot legally be collected, though many consumers are unaware of the statute of limitations for legal collection of this debt. In many cases, zombie debt is legally unenforceable, meaning that unlike your current creditors, zombie debt collectors cannot sue you in order to collect the debt. However, there is no law against trying to collect the debt, and many consumers, frightening by the threats, end up paying the debt.
So, what should you do if someone contacts you about debt that is more than four years old? Here are some things that you should consider if a collector contacts you via mail or telephone:
- Send the collection agency a certified letter within 30 days of contact stating that you are disputing the debt in question. This action forces the collection agency to provide you with proof that the debt indeed belongs to you. They must also provide you with the name and address of the original creditor, if the debt was purchased by the collection agency. This action will also require the collection agency to stop all collection activity until this information has been provided.
- Never acknowledge that the debt is yours, even if you think it is.
- If the debt is yours, but it is from years ago, it is likely unenforceable in a court of law. Each state has its own statute of limitations on collection of old debt, and if the debt is more than six years old, the creditor cannot sue you for the amount owed. It’s important that you find out what the statute of limitations is in your state. For example, in California, the statute of limitations is generally 4 years (unless a state tax debt).
- Do not agree to a reduced payment or to make payment on the debt. What this does is actually restart the statute of limitations, which starts on the last day of activity on the account. Once you agree to make a payment, the debt becomes valid again, providing the creditor with the option to sue you in order to collect the debt.
- Under the FDPCA, a consumer cannot be sued after six years, nor can a debt collector insinuate that arrest or imprisonment is a possibility if you do not pay the debt. They also cannot continue to contact you if you have written a cease and desist letter, nor can they contact your employer, friends, relatives, or neighbors.
- Of course, contact an experienced attorney in your state to obtain legal advice for your specific situation.
If you determine that you want to pay off the debt, keep in mind that you will not be paying the debt to the original creditor, but to someone who has bought that debt for pennies. You are certainly within your rights to pay off the debt, but make sure you know who is benefiting. The money isn’t going to go to the original lender, but instead to the debt collection agency. For example, if you want to pay off a debt to your family doctor in order to start seeing that doctor again, realize that the doctor’s practice likely sold the debt long ago. In this situation, you might consider contacting the original lender and offering to pay them directly.
Zombie debt continues to be a problem, but knowing your rights can go a long ways towards putting these unscrupulous collectors out of business.
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