Debt from your past that you never paid off can come back to haunt you in the form of “Zombie” debt. Companies can buy your old debts from whoever you originally owed and try to collect from you, even though you may have no legal obligation to pay at this point.
Team Clark is hearing of more and more cases of people being harassed about — and even taken to court over — Zombie debts. In this article, we’ll talk about what to do (and not to do) if this happens to you.
How to deal with someone trying to collect a ‘Zombie’ debt
In order to deal with someone trying to collect a Zombie debt, it’s important to know exactly what it is and how it is treated by the law.
What is a Zombie debt?
While the term “zombie” might make you think about the characters in movies or television shows like “The Walking Dead,” Zombie debt is actually money that you owe from long ago that “comes back to life” because someone is coming after you for it.
“Zombie debt is where a company (and I use that term “company” loosely), sleazoids go out and buy old, old, old credit card or other debts — many times from a bank — that can be even 25 years old,” money expert Clark Howard says. “They’ll pay a fraction of a penny on each dollar for the debt.”
These debt collectors are coming after people in two primary ways: Most of the time it is through harassing phone calls and letters, but in an increasing number of instances, it is through the courts.
In most cases, you are not legally bound to pay these debts, but it really depends on how old the debt is and where you live. This is why it is extremely important to know your rights — and how to deal with these dishonest collectors.
How to handle debt collectors: What is a Statute of Limitations?
Every state has a Statute of Limitations, which is the period of time in which someone can legally be sued for a debt. In most states the Statute of Limitations begins on the date of last activity on the debt — typically the last day that you paid on the debt or 30 days after you miss a payment.
The Statute of Limitations differs depending on which state you live in. For example, in Team Clark’s home state of Georgia, the Statute of Limitations for credit card and medical debt is six years. Any debt older than that would be outside the statute and considered a Zombie debt if someone tried to collect on it.
After the Statute of Limitations on debt passes, the debt is considered “time-barred” and you can’t legally be sued — but as we’ve said, collectors may still try.
One important thing to know is that once the Statute of Limitations has passed, it doesn’t mean that you don’t owe the debt. It just means that the debt collector loses the right to take legal action against you.
Note: The law applies either in the state where you live now or the one specified in your credit contract. If you moved, check the statutes in the state where you first incurred the debt.
How to handle debt collectors: Taking action
If you have reason to believe that the Statute of Limitations has passed on a particular debt that you’ve been contacted about, you should ask the debt collector whether it has or not. They’re not required to answer, but by law they must answer you truthfully if they do. If they decline to answer, within 30 days you’ll need to write a letter requesting verification of the debt.
In that letter, you should ask the collector two questions:
- Is the debt time-barred?
- When was the date of the last payment?
If the collector still doesn’t answer the first question (again, they’re not required to answer it), ask about the date of the last payment. If you haven’t made any payments, the clock may have started when you took out the debt or when it was marked delinquent, depending on your state.
If a debt collector won’t reveal this information, you can refer to the debt validation letter. A collector must send you this letter within five days of first contact. If you haven’t received the letter within 10 days, ask for it. This notice should include the amount owed, the date of the last payment, the name of the collection agency, the original creditor and the original account number.
Note: Never give any personal or financial information over the phone!
How to handle debt collectors: Stopping those phone calls & emails
If you’re being bugged by a debt collector seemingly at every turn, you do have a recourse. It’s called a “drop dead letter.”
“You also have the right to send what’s called a drop dead letter,” says money expert Clark Howard. “This letter will prevent the collector from contacting you again about a debt. Collectors can’t call you at work once you say they can’t, though you can still be sued against the debt you legitimately owe.”
Here’s what NOT to do if someone comes after a time-barred debt
“Never, ever, ever agree to any partial payment against an old debt,” Clark says. “If you pay even so much as one penny against an old debt that’s not legally active anymore, the entire debt comes back to life even if it had been outside of the Statute of Limitations.”
Basically, a tiny partial payment against one of these debts means you could be sued over that debt — even if it’s 25 years old.
Clark says that collectors are getting crafty with their messages to people they are trying to collect from.
“These sleazoids in the debt-buying industry purchasing these old debts are contacting people and saying all kinds of clever phrases like, ‘Wouldn’t you like to settle this old debt?’ and they’ll say something like ‘A dollar or five dollars will remove this old debt from our books.’ It’s a trick!!!”
Again, don’t pay anything against a Zombie debt unless you intend to pay it in full!
What to do if someone sues you over a Zombie debt
As we mentioned, some of these debt collectors are taking debtors to court in order to collect on Zombie debts. Again, these time-barred debts can’t be sued against, but that doesn’t mean they won’t try.
Clark says that if you are sued over a Zombie debt, you must show up to your court date.
“If you don’t show up, the judge is likely to issue a judgement against you and that will result in the debt becoming valid again,” he says.
If you do have to go to court over a Zombie debt, simply bring your documentation that shows the debt is outside the Statute of Limitations in your state and time-barred. Clark says that the attorney representing the collection agency likely won’t know how old the debt was to begin with and the judge will rule in your favor.
But, again, you must show up!
It’s no secret that debt collectors will resort to some dirty tactics to collect your money, even if you are no longer legally bound to pay. The important thing is to know your rights and handle these collectors in the manner described above. It’s the only way to beat them at their own game.
Have more questions about Zombie debt or debt in general? Call our Consumer Action Center at 404-892-8227! It’s free and volunteers are standing by to help you Monday-Thursday 10am -7pm ET and Friday 10am-4pm ET.