Zombie Debt: Avoiding The Walking Debt
Sure, Halloween just passed, but zombies still walk. They’re everywhere. I’m not talking about those schlep-y critters from “Night of the Living Dead.” I’m talking about the really scary zombies – zombie debt.
What the Heck Is a Zombie Debt?!
I’m so glad you asked because I truly love the word zombie and you just gave me another reason to use it. Zombie debt occurs when debt collectors bring debt back from the dead. A dead debt refers to an old debt that you no longer have legal responsibility for because the statute of limitations ran out on it. It did not just fall off your credit report. You legally no longer owe the money.
A debt service will purchase these old, dead debts, often called junk debts, for pennies on the dollar. They then go after the consumer as hard as possible to try to force or trick them into paying for something they no longer owe bringing the dead debt seemingly back to life as a zombie debt. The original creditor may have taken a settlement, written off the debt or aged out the debt.
Unlawful Debt
When I say “go hard,” I mean that they will try everything legally permissible like badgering the person with phone calls, threats to sue them, filling their mailbox with letters, e-mailing them a constant stream of spam. Sometimes, their action turns illegal and become simple harassment in an effort to collect this consumer debt. That is why you need to take zombie debt seriously, despite its funny name. You need to protect yourself against this type of legal violation. The US government has created legal protections so that only the people you want to hear from may legally contact you and those protections include debt collectors.
How to Handle Zombie Debt
As scary as a debt you thought was dead coming back to life, you can handle it. You can make the zombie debt and the debt collectors go away. No garlic or fire-y torches needed.
The Debt Collector Will Phone You
Invoke your rights as stated in the US federal law, Fair Debt Collection Practices Act, to make them go away immediately. It is your right to say they cannot phone you. They can only write you letters. Hey, if they do not comply, you get to report them to Federal Communications Commission (FCC), the Federal Trade Commission (FTC), the Consumer Financial Protection Bureau, and your state Attorney General.
The law says you get to decide how you are contacted. It also prohibits them from contacting you in the early morning or late at night. The law states specific hours they can contact you which we’ll talk about later in this article.
You Are Not the Person to Whom They Asked to Speak
It is also illegal for them to contact you if you are not the person who owes the money. Let’s say a debt collector kept calling me about a Diner’s Club credit card that a different person named Carlie Lawson opened and I told them right away that is not me, but they continued to contact me. That is illegal. I could turn them in, to the above government agencies. (I’m safe on this example since I have never had a Diner’s Club credit card.)
It is just as illegal for them to contact you if you recently got a new phone number and the person who previously had it owed the money. Once you tell the debt collector that you are not the person they are calling and that they no longer have that phone number, they legally have to stop calling you.
Demand Written Proof of the Debt They Claim
To anything they try to say, answer with "I want to see evidence of this debt in writing. I do not acknowledge this debt." If they ask what evidence you want, specify that you want them to mail to you the credit card agreement you originally signed and the full account history. If they cannot provide this, then they do not have proof of the debt and they have no legal right to take action against you. Keep any letter they send you. You must document all of your correspondence. This can save you in court later.
Do Not Acknowledge the Debt They Mention
Don’t acknowledge it whether it is or may be yours. I say “may be” because often these debts are so old that you may not remember or they may have aged out, meaning they passed the statute of limitations. “I do not acknowledge this debt," should be your mantra for your first and only phone conversation with the debt collector.
Do Not Agree to Any Kind of Payment or Payment Plan
This gives the collection company the legal right to collect the debt. Ignore their mantra that you should "show your good intentions" by making a payment. That can reset your statutory period providing them with a new statute of limitations.
Get off the Phone with Them as Quickly as Possible
This provides them less time to trick you into saying something that could make the debt yours – even if it was not in the first place.
Zombie Debt: Debt Collectors Letters
In the movies, letters are heartfelt, beautiful, and moving. In real life, debt collectors write terse prose. They say nasty things. They threaten. They harangue. They’re just shy of chest-beating like Tarzan at times. Just roll your eyes as you read them and then, get ready to write them back. Within 35 days of your receipt of the letter, send a certified letter in response to the debt collection company.
Carefully Examine Any Documentation They Sent
Did they include a copy of a credit card contract with your signature? Or, uh oh, is that someone else’s signature? Check everything carefully. Read the full account history. They may not believe that that is not your signature, but you may be able to go to court with copious amounts of documentation that you could not possibly have been the person to make the charges.
Look up where you were and what you were doing when the account charges were made. If you were in Ft. Worth on business, you could not have dined in New York City the same minute. Build up a number of these challenges. Many debt collectors like to take you to court. It is so fun if you can ruin their day a little.
Let’s Say the Debt Is Yours
Once you see the documentation, you recognize it as that credit card you had ten years ago that you frequently put gas on when on business trips. before you respond to them, do the following:
Check Your State’s Statute of Limitations on Debt
You may no longer be legally responsible for the debt. Once the statute of limitations passes, debt collectors no longer have the right to collect the debt through the court system. Every US state has different laws and time periods as well as what can renew the statutory period.
Consult with an Attorney
This is after you have checked the statute of limitations. You need to make sure that you actually understand the statute properly and any actions that could have renewed the debt.
Write a Letter with the Help of Your Attorney
Explain that you are not legally responsible for the debt and you do not acknowledge the debt. Demand that they stop harassing you. Let them know in clear terms that you will take legal action if they continue to contact you. If you have specifics as to why you are not responsible for the debt, such as an expired statute of limitations or your bankruptcy declaration, include that. If you declared bankruptcy, include a copy of your discharge order in the letter. Send the letter via certified mail and request a return receipt.
Debt Collectors and Court Dates
Although it typically proves pointless, some debt collectors will try to collect a debt even after the statute of limitation has expired. After it expires, they cannot use the court system. Typically, the clock on the statute starts on the last date of activity on the debt. That means the last payment you made.
A multitude of things can affect whether the length of the statute of limitations changes. One common thing is moving to a different state. Even a temporary move can affect the length of the statutory time period.
Bankruptcy Denies Debt Collectors the Right to Collect Debt
When you discharge debts through bankruptcy, the debt collectors lose the right to collect them at all. They may insist on going to court, but you should be prepared to inform the judge that you provided written notification of bankruptcy and that you let them know the statute had expired. Take the receipt from the certified letter you received so you can prove that the debt collector received it.
Show up to Court
Never ignore a court summons. You might think the statute of limitations ran out. Hire an attorney anyway and go to the court date. If you do not attend, the judge typically finds for the debt collector. That means they will usually receive the judgment they request. The law refers to this as a default judgment and it can be legally enforceable whether or not it’s a legitimate debt of yours.
Know Your Debt. Fight Your Debt. Reach Financial Freedom.
Tips on Dealing with Zombie Debt
Zombie debt collectors may not try to rip the boards off of the outside of your home, but they will try pretty much everything else to get to you. Do not let them. Follow these tips to chase away the zombie debt collectors.
The First and Most Important Tip: Never Give Your Banking Information to a Collection Agency
Do not tell them where you bank and definitely never give them your routing number and account number. With that information, they can withdraw the amount they claim you owe. You will have no recourse because you provided them with the information.
These zombie debt collectors will try every trick in the book to get your money that they do not deserve. Do not fall for their traps. Here are a few of the top things to watch for that these unscrupulous debt collectors try:
They Illegally Re-Age a Debt
That is by reporting it as a new debt to the credit bureaus:
They will promise to eradicate the red checkmark from the debt from your credit report.
They use credit card offers that promise you a guaranteed card, sometimes with an introductory interest rate you would not normally obtain. The trickery is that they include the balance debt they’re trying to collect.
You may have built a fine credit rating since the zombie debt occurred. The sad thing is that these debt collectors do not care about that. They bought your debt for only a few bucks and they want to make a killing off of it. They buy dead debts all the time, in bulk. A $1,000 debt might only cost them $5 or $10. If they can get just one debtor or supposed debtor to pay them $1,000, they just paid for 100 or more of the debts they bought.
Debt Collectors Will Want to “Negotiate” the Debt with You
Because they buy these suckers so cheap, they willingly will “negotiate” the debt with you. Remember, this is a dead debt anyway, so you no longer owed it. They will tell you they are willing to take just half of what you owe or 25 percent of it. Well, of course, they will. You did not owe it in the first place. It might have aged out. You may have settled with the original creditor. The creditor may have gone out of business, negating the debt. The creditor may have literally died. The creditor may have written off the debt. The creditor may have forgiven the debt.
The point is that you should not accept one of the zombie debt collectors’ offers. They will try their best to trick you into paying a debt you simply do not owe. Do not let them do this.
Keep Track of Your Credit Reports and Paychecks
Because they lack scruples, but love scare tactics, you should carefully monitor your credit report. You need to be ready to have the credit bureau correct any lies they place on your account, such as illegal re-aging. Another way they do that is to lie about the delinquency date to try to affect the statute of limitations.
Also, check your paycheck. You may find the money gone from it. The zombie debt collector can take you to court. Let’s say they mailed the documents to the address where you lived when you or somebody incurred the debt, but you no longer live there. You would not have received it. They could have had a notice served to that address. Of course, you would not have gotten it. You were not there. They could meet the burden in court though they had attempted to apprise you of the court date.
When you do not show up, as mentioned above, they get a default judgment. They can request and receive garnishment of your paycheck. You will suddenly notice your paycheck shrunk. That’s the garnishment. You have to go to court now to get the garnishment removed and to refute the debt. Take all the proof you have that it is not yours or you do not owe the amount they say you do.
The horrible thing is that making even one payment to a zombie debt renews the debt. Paying it off renews the bad credit mark that was on your credit report years before if it was actually yours.
What if the Statute of Limitations Has not Expired Yet?
Take extra care in your communications if the statute of limitations has not yet expired. Negotiate very carefully. You could end up paying for somebody else’s debt. Make them prove it is yours and that the genuine statute of limitations has not passed.
If the statute has not passed, you should deal with the debt as soon as possible. It probably is still messing with your credit rating. Talk to an attorney. If you really do owe the debt, you can typically settle for less than the full amount. Have your lawyer request a formal offer-in-compromise in writing The amount of the forgiven debt gets reported to the IRS. You will receive a Form 1099 so that you can report this amount on your income tax forms.
Your Rights Protected: Fair Debt Collection Practices Act
Since 1978, the US federal government has protected consumers under the Fair Debt Collection Practices Act. It makes many practices of debt collectors illegal. Congress said that debt collectors used “abusive, deceptive, and unfair debt collection practices” and they created a way to stop them.
Congress, in passing the 1978 Act made it illegal for creditors to harass you, period. Even the times of day they can legally contact you are limited.
According to federal law, the following limitations apply to contact:
Debt Collectors Cannot Contact You at an Inconvenient Time or Place
It is illegal for them to contact you before 8 am or after 9 pm. It is illegal for them to contact you at work, if you told them or wrote to them that you may not receive calls or texts or other forms of contact at work.
They may only contact you until you tell them or write them that you want them to cease and desist from contacting you. At that point, they can only send you a certified, written legal document seeking a legal remedy, i.e. a court summons.
Debt Collectors Must not Lie about the Debt
It is illegal for a debt collector to lie about the debt to you or other parties. It is illegal for a debt collector to lie about what will happen if you do not pay the debt. It is illegal for a debt collector to pass on false information about a debt to credit reporting agencies.
At the outset, a debt collector can phone you, write you via letter or e-mail and, if they have your mobile phone, they can text you. You have the legal right to stop them from all of those forms of contact and any others they dream up. They are literally legally barred from trying to destroy your peace of mind.
You could tell them that you will only accept contact via US mail service. They have to adhere to that. If they do not and they keep phoning you or texting you or contacting you in some other creative way, you can take them to court and the court will spank them.
After 7 Years the Debt is Removed from Your Credit Report
According to the Act, the debt collector cannot sue you over a debt that has been inactive for at least six years. After seven years, the debt gets removed from your credit report. You should send each debt collector a cease and desist letter stipulating that they stop contacting you and any person or organization associated with you regarding the debt. That protects your family, friends, and workplace from a barrage of contacts.
To really protect yourself, once you have told a creditor verbally on the phone that you will only accept written correspondence, buy an answering machine. It provides the easiest way to record your phone conversations. Simply screen your calls. When a creditor phones, let the machine catch it, then let the machine keep running while you pick up the phone call.
Let them know the call is being recorded for your protection. This way when or if they break the law by harassing or threatening you about the debt, you can take the recordings to court with you. Amusingly, they will have to pay you since the Fair Debt Collection Practices Act makes their practices illegal. The government will fine them and require them to pay you restitution.
Get Help Watching Your Credit
You’re a smart cookie or you would not be reading this. You can use a simple website like creditry.com to help you manage your debt. Use a debt tracker to monitor all of the credit lines you have open.
The advantage to using a service like Creditry is that it helps you track everything that has to do with your credit. You can quickly find mistakes on your credit report and improve your credit score.
In the case of watching for zombie debt, it can help you watch for things that lead to zombie debt:
identity theft
computer error
fraud
Identity Confusion
Sometimes, identity mix-ups occur. Once, right after I landed a job at a major university, the benefits office misentered my information and that of another woman who worked on a different campus of the same university. They had confused us since one has the middle initial “R” and the other has the middle initial “L” and they were short-staffed on data entry clerks. It happens.
It can take time to fix, too. For months, she and I traded benefits paperwork through campus mail between the main campus and health sciences campus. We got a great laugh out of it, especially when I got notices about her then teen’s braces (and I have never had kids) and she got the ones of my physical therapy for a mountain biking knee injury (and she had never mountain biked).
Final Thoughts
You really have to watch your credit report. I and my similarly named co-worker were just lucky we were both anal about paying our bills and sending paperwork back and forth. Eventually, our requests were honored at the benefits office and everything got straightened out. Be ready for the time commitment it takes to solve such problems though. It took us months and we had a friendly benefits clerk, plus it was our employer.
Vigilance about keeping watch over your credit score can help protect you from zombie debt. Use services like Creditry to monitor your credit report. Quickly respond to the credit bureau to question any unusual data. You might spot a zombie debt before the debt collector even phones. Wipe out the zombies. Once you kill off a debt, it should stay dead, not play dead. Until the next zombie attack, stay safe and spend well.