If you’ve ever been contacted by a debt collector during a rough patch in your financial life or about a debt that belongs to someone else, you know how stressful it can be. You may…
If you’ve ever been contacted by a debt collector during a rough patch in your financial life or about a debt that belongs to someone else, you know how stressful it can be. You may even be troubled by zombie debt, which can come alive, even when it isn’t Halloween.
A zombie debt is a past-due account that’s very old or outside its statute of limitations and is not legally collectible, but still comes back from the dead to haunt you. It’s a funny term, but not a financial problem to be taken lightly.
The statute of limitations sets a deadline for when a creditor can sue you for an unpaid debt. It varies depending on the state where you live, the type of debt and your agreement with the creditor.
For instance, the statute of limitations on credit card debt in some states is three years, but in others, it can go up to 10 years. And some debts, such as income taxes and federal student loans, don’t have a statute of limitations because you’re never off the hook for them.
Even if the deadline for a creditor or debt collector to sue you has passed, it doesn’t mean you’ll never hear from them again. They can continue to try to collect overdue money indefinitely because you still owe it. In other words, collectors are within their rights to contact you and ask you to pay a debt or offer payment terms, but they can’t sue you once the statute of limitations has expired.
Zombie debt is revived when a collections agency purchases it from the original creditor or from another debt collector for pennies on the dollar. The zombie debt collector may use intimidating or illegal tactics in an attempt to scare you into paying or cause you to take an action that revives the statute of limitations, which is known as re-aging an old debt.
In some states, re-aging or resetting the clock on a debt’s statute of limitations could result from something as simple as acknowledging that an old debt is yours or making a partial payment. If a collector tricks you into taking an action that revives a debt, it’s allowed to sue you for the full amount owed.
To stay safe, be aware of common tactics used by potentially harmful zombie debt collectors.
Verbally harassing you. This is illegal, according to the federal Fair Debt Collection Practices Act. For instance, debt collectors are prohibited from calling you before 8:00 a.m. or after 9:00 p.m., and they can’t contact you at work if you inform them that you’re not allowed to receive calls there.
Misrepresenting their company. Collectors can’t tell you that they are an attorney or a litigation firm when they aren’t.
Threatening a lawsuit. This is illegal if the statute of limitations for your debt expired, but it can scare people into paying.
Beginning a lawsuit. Collectors may try to sue you, even when the statute of limitations has expired. If you receive a summons, don’t ignore it because you have a limited amount of time to respond. If you don’t respond in time, you may forfeit your right to fight the lawsuit using the statute of limitations as your defense.
Getting you to pay for someone else’s debt. In general, you’re not responsible for a debt that’s not in your name. If a collector tricks you into believing that you owe a debt that isn’t yours, making a payment could be construed as an admission that the debt is yours.
Promising to stop contacting you in exchange for a small payment. As mentioned previously, getting you to pay any amount can be a setup to reset the clock on the statute of limitations, so the collector can sue you for the full amount.
Promising to keep the debt off your credit report. Delinquent debt stays on your credit reports for seven years, even if you settle for less than you owe or pay it off.
Speaking with a collector is risky because you could accidentally say something that gives them a leg up or resets your debt. All communication should be done through snail mail, so you have hard copies.
To protect yourself, request that a collector verifies the debt, which proves you owe it and that they’re authorized to collect it. Also, get legal help so you fully understand the options for dealing with an unpaid debt and how to safeguard your financial future. The Consumer Financial Protection Bureau offers advice on how to find a lawyer or attorney to represent you in a lawsuit from a lender or debt collector.