What is zombie debt?
If somehow you’ve owned a debt account in the past that you couldn’t pay, it is possible that now it might be written off as “uncollectible debt.” The creditor might have lost all hope and stopped collecting the debt as they can’t reach you or can’t collect the money from you.
But, in recent times, a new group of debt collectors has started to buy these old debts and also trying to collect them from the borrowers. These debts are named as “zombie debt.”
Zombie debt is normally an old debt, which has crossed the statute of limitations of that debt and expired. But a debt collector may contact the borrower and ask for payment again, even if it is expired. These debt collectors are normally called debt scavengers, who buy old debts from the original creditors at a low value, and then start poking the borrower to pay up.
According to NerdWallet - “It’s called zombie debt because it’s old. All consumer debts, from credit card balances to medical bills, have limits on the number of years creditors have a legal right to sue you for payment.”
If the consumer does not respond to the collection call, there will be no harm and they can easily avoid zombie debt collectors.
Debt collectors can’t sue a consumer once the debt is expired. But, if the consumer makes a payment, then the debt cycle starts all over again.
As per a rule proposed by the Consumer Financial Protection Bureau (CFPB), a borrower with old debt must receive a notice from the debt collector who is claiming payments against an old debt.
But few of the consumer advocates do not support this proposal.
They believe this rule may create more confusion between the borrowers.
In many states, that notice may help debt scavengers to revive zombie debt. As a result, borrowers may have to deal with expired debts that must be paid off.
There are few more view that can be considered:
Christine Hines, legislative director of the National Association of Consumer Advocates is also strictly against the debt collection beyond their statutes of limitations. She has expressed her views about this - “Consumers just don’t know the ins and outs of state and federal debt-collection laws and probably will not understand the consequences.”
So, if you put all of these views and information together, it can be said that zombie debt is bad for consumers. But is there any way out of this problem?
Yes. Borrowers have a fair chance to get rid of zombie debt from the very beginning. They just have to follow the below-mentioned steps to protect from zombie debt. Let’s have a look.
Steps to avoid zombie debt collectors
You, the debtor, do not have to answer the questions of a debt collector if he wants to revive an old debt. Instead of answering, you may ask the debt collector the below-given questions:
- What was the last payment date? (ask for the exact date)
- Is the debt time-barred? [*Time-barred debts are beyond the statute of limitations(SOL)]
Debt collectors normally don’t want to answer the second question, as they might fail to collect the debt if the statute of limitations is over. So, you should check out the SOL before you start negotiating with the collector. The consumer should ask to validate the debt, too.
A debt collector should provide this letter within five days of the first contact.
So, follow these steps and find out how to deal with zombie debt:
1 Don't talk to the creditor
If a collector calls you, do not attend the calls. You don't need to provide your information to the collector. You might say something which will start the debt clock again by renewing the statute of limitations.
2 Ask for a debt validation letter
As I said earlier, you should ask for a debt validation letter from the collector.
That letter must contain the debt amount, the date of the last payment, the debt collector's name, and how to request information on the original creditor.
You should ask the debt collector to send this letter via certified mail. You can also ask for the name and address of the original creditor. (15 U.S.C. § 1692g).
3 Determine if the debt is past the statute of limitations
Ask the debt collector if the debt is past the statute of limitations.
You may also check your state’s laws on time-barred debts.
You cannot be sued for a debt that’s past the statute of limitations. But remember, the debt scavenger may try hard for it.
4 Get information about the debt collector
Before you talk to the debt collector, first, get the name of his company and the full address. After that, search online about the company and read reviews.
If you find out that the company isn’t a genuine law firm, or you read too many complaints about its debt collection practices, try to avoid connection at any cost.
5 Don't do something foolish
To avoid zombie debt collectors, don't admit that you owe the debt, or reveal any information to them.
Don't make any payments towards the debt until you become assured that the debt is yours, genuinely. The debt collector may ask you for much personal information, such as about your income, bank accounts, Social Security Number, or property you own, etc.
Don’t give such sensitive financial information to the debt collector. This information might be used to collect that zombie debt from you.
6 Check your credit report
You should check your credit report from all three of the credit bureaus to check if zombie debt collectors have illegally reported an old debt. If it happens, you must asap file a dispute with the credit reporting agency, and follow up regularly.
7 Know your rights
To avoid zombie debt collection, you should know the rules governed by the FDCPA.
As per the rules, debt collectors must cease all communication with you if you send a letter to them.
The debt collector may contact you and notify you that it is going to stop the collection efforts or to inform you that a lawsuit is filed against you (15 U.S.C § 1692c).
8 Don't avoid a lawsuit
If you somehow get a summons and the collector filed a lawsuit against you, don't panic.
You need to answer the summon, and get contact information for the court in which the lawsuit is filed.
You should be active towards the lawsuit, as you might have a limited timeframe to respond.
If you ignore the suit, you could forfeit your right to challenge the lawsuit.
9 Talk to your lawyer
Don’t hesitate! You must consult a consumer protection lawyer or debt relief lawyer if the debt collector bothers you too much. The attorney may make you understand your rights and will guide you through the entire process.
With proper help you can
- Lower your monthly payments
- Reduce credit card interest rates
- Waive late fees
- Reduce collection calls
- Avoid bankruptcy
- Have only one monthly payment