Financial debt is much scarier than any horror movie.
Endless bills, mounting interest, and calls from debt collectors are the stuff of nightmares.
And yet, while all debts are frightening, zombie debt is in a league of its own.
In this short article, we’ll explain what zombie debt is, how it works, and how you can eliminate it for good (with the law on your side).
What is Zombie Debt?
Just like in the movies, zombie debt has unexpectedly beaten death and come back to life.
It’s a familiar story: after haunting you for years, a pesky debt quietly goes away.
Years go by, and you hear of it—and think of it—no more. After all, the debt vanished from your credit report altogether.
Your FICO credit score finally went up, you sleep a little better at night, and your voicemail is no longer plagued by annoying debt collectors.
Then, one day, you get a letter in the mail.
It says “Urgent” in red on the envelope.
You open the letter and learn that the old debt is no longer dead. Not only that, but the collector threatens legal action if you don’t respond.
The zombie debt is back, and it wants revenge.
How Does Zombie Debt Work?
In most cases, zombie debt is “revived” by a group of people known as debt scavengers.
These third-party collectors buy up large amounts of unpaid debts from creditors for cents on the dollar.
Literally. They pay pennies—sometimes less than a single cent—to purchase these debts.
Then, they use those undead debts to harass the consumer until they pay up the original owed amount—or at least a nice chunk of it.
Though it’s unfortunate to admit, buying delinquent debt is an immensely popular business in our modern economy. In fact, it’s a billion-dollar industry.
After scavengers buy up debts, they’ll use a range of scare tactics to frighten consumers into submission. In some cases, they’ll try to trick you into paying for a debt you don’t even owe.
Fortunately, American consumers have the law on their side (as we’ll discuss later).
Types of Zombie Debts
While debt scavengers are desperate to make a profit, they only have a few types of undead debt in their arsenal.
Most zombie debts fall into these three categories:
1. Other People’s Debts
Unfortunately, many debts are often misattributed.
For example, someone with a similar name may have their debts assigned to your account. In other cases, a creditor might make a clerical error and accidentally add a debt to your name.
Of course, many victims of identity theft are vulnerable to zombie debt.
As you might expect, debt scavengers aren’t interested in fairness as much as profit.
They’ll shamelessly try to get you to pay for someone else’s debt, even if you bear no responsibility for it whatsoever.
P.S. Check your credit report to make sure you aren’t responsible for other people’s debt.
Click here to learn how to request (and dispute) a credit report. They’re free to request once a year from each of the three major credit bureaus, per federal law.
2. Settled Debts
Though many people don’t know about it, debt settlement is an essential negotiating tool for dealing with nagging creditors.
Debt settlement is especially useful when dealing with exorbitant medical bills.
Unfortunately, settled debts can eventually become a type of zombie debt—even if the original creditor allowed you to pay less than the full amount.
Debt scavengers love using settled debts to shake down unsuspecting consumers.
3. Debts Beyond the Statute of Limitations
This is the most important part of the article.
While debt collectors won’t tell you this, they only have a limited period of time during which they can sue you for an outstanding debt.
This window of time is legally known as the “statute of limitations,” or SOL for short.
While the SOL varies by state (and type of debt), it typically ends between three-to-six years from the original date of delinquency.
That’s why creditors (and collectors) are so pushy—they’re in a time crunch, and they know it.
Despite the fact that expired debts are not your legal responsibility, many scavengers will harangue you until you pay for them.
Don’t fall for the trap!
Zombie Debt: What the Law Says
We’ve been living in a horror movie long enough. Let’s flip the script and focus on the good news.
Here’s what the law has to say about zombie debts: if they’re beyond the statute of limitations, you don’t have to pay them.
It’s that simple.
Of course, debt scavengers will never admit to that. They’ll harass you, attack you, and insult you until you pay a small portion of the allegedly owed amount.
But be careful!
If you make even one payment on a zombie debt, you’ll immediately revive it.
Worse yet, if you pay a zombie debt that is beyond the statute of limitations, you will restart the SOL in full.
Then, the zombie debt will become living debt and wind up back on your credit report. In fact, it could even empower the debt scavenger to sue you and take you to court.
Remember: you’re under no legal obligation to pay a zombie debt that’s beyond the statute of limitations.
So don’t pay anything, and don’t even admit that you owe a debt.
Scavengers can use your verbal acknowledgement of a debt against you, even if you accidentally misspoke.
3 Steps to Take if Contacted by a Debt Scavenger
We’ll keep this very simple.
If you’re contacted by a debt scavenger, there are three things you need to do.
The first step is easy:
1. Request a Debt Validation Letter
Whether you’re contacted by phone or mail, be slow to respond—and don’t spend long on the phone.
If you receive a letter in the mail, it should contain the necessary information for you to proceed.
However, if a debt scavenger calls you on the phone, promptly ask for their name, their company information, and all details concerning the alleged debt.
Then, ask them to mail you a debt validation letter, which will help you verify if the debt is real, if it’s actually yours, and if it has been paid or settled.
Then, politely end the call.
Do so without ever acknowledging the debt in question, paying any amount, or admitting to any allegations at all.
2. Gather The Facts
Now, it’s your turn to get the story straight.
Gather your proof of payment and all documents related to the alleged debt’s history.
Compare the scavenger’s debt validation letter with your own findings.
Look for evidence that the owed amount is old—i.e., that it’s well beyond the statute of limitations.
You can quickly do this by researching your state’s laws around time-barred debt.
For example, if you Google search “time-barred debt in Florida,” you’ll see the SOL ends after five years.
If you can prove that the debt is past the statute of limitations, you cannot be legally sued for the zombie debt in question.
3. Decide on a Strategy
Here’s a brief rundown of other common zombie debt outcomes:
- If you already paid the debt, write a letter to the debt scavengers demanding that they cease all contact with you. Include any relevant proof that you may have. As we will discuss below, such actions are legally permitted by the Fair Debt Collection Practices Act (FDCPA).
- If the debt is not yours or is fraudulent, write a letter to the debt scavengers demanding that they cease contact with you. As always, include any relevant proof that you may have.
- If the debt does appear to remain within the statute of limitations, you may need to resolve the unpaid account (or negotiate a settlement). Be sure to get any agreement in writing before issuing any payments.
If you have questions about this, or are unsure about how to proceed, consider hiring a lawyer to defend against potential legal action.
Remember: The Law is On Your Side
If debt scavengers are harassing you, don’t worry: you have the law on your side.
According to the Fair Debt Collection Practices Act (FDCPA), third-party debt collectors are limited to the means and methods by which they can contact you.
They’re also restricted to when they can call you and how often they can do so.
Nevertheless, if you are being bombarded by debt scavengers—or if you already paid the debt in question—you can write them an official letter demanding that they cease contacting you by phone.
If they continue to contact you by any method other than standard mail, you will earn the legal right to sue them.
Note: If you need to file a formal complaint regarding a particular debt collector, you can contact the Consumer Financial Protection Board here.
When it comes to zombie debt, remember that the law is on your side.
More importantly, if the owed amounts are outside the statute of limitations, you don’t have to pay a penny.
Nevertheless, be very careful when engaging with debt scavengers, and watch what you say. Such companies are interested in profit at any cost, even if it means financial ruin for the consumer.
Again, don’t hesitate to contact a lawyer or financial expert to help you navigate these complicated issues.
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