Debt can be a scary thing. The thought of old debts coming back to haunt you is enough to keep anyone up at night. But what about zombie debt? Zombie debt, also known as phantom debt, is an old or expired debt that has been purchased by an investor or scammer at a deep discount. The goal is to get misinformed debtors to pay back money that they are no longer legally responsible for.
Learning about zombie debt gives you the tools you need to deal with scammers effectively. Most old debts will disappear from your credit report after seven years. However, if a debt collector contacts you, it’s important to do your research to make sure they are legitimate. Even when you are responsible for a debt, you may not be required to pay the full amount. Understanding what you are legally responsible for can help you avoid being scammed by a debt collector.
How Does Zombie Debt Work?
Debt collectors may try to contact you about expired debts, sometimes called “zombie debts.” These are debts that are no longer legally enforceable, but which the collector may be able to get you to pay anyway. Because the cost of buying these expired debts is often low—sometimes just pennies per dollar—zombie debt collectors can make a decent profit when consumers agree to repay old debt. Unless the state you live in requires a debt collector to disclose that it can’t sue you to collect the debt, you might take actions that revive the debt without knowing it.
Even though you may think paying a zombie debt, or even just acknowledging it, is the right thing to do, this could actually reset the clock on the debt. That means the collector can sue you or report the debt to the credit bureaus, depending on state laws.
Tactics And Strategies Debt Collectors Use
Debt collectors can be a real pain, especially the so-called “zombie” debt collectors who try to trick you into paying a debt you don’t even owe. Here are some of the most common tactics they use:
- Offer to leave you alone if you pay a small amount. Debt collectors may try to convince you that you need to pay them a portion of your debt in order to get them to stop contacting you. However, this is not true. You can ask them to stop contacting you without paying anything under the Fair Debt Collections Practices Act (FDCPA). All you need to do is send them a written letter telling them that you don’t want to be contacted any further.
- You are threatened with a lawsuit if you do not pay. They may threaten to sue, but it is unlikely they have any grounds to sue you.
- Harassment or verbal abuse. Being harassed by debt collectors is a scary experience, but there are ways to protect yourself. The Fair Debt Collection Practices Act makes it illegal for collectors to engage in certain types of harassment, such as making threats or excessive calls. You can stop the harassment by sending a letter to the collector telling them to cease communication.
- Claiming to be a litigation firm. Most debt scavengers are not lawyers, but they may try to trick you by saying that they are. They usually don’t have any legal basis to sue you or collect payment for zombie debts.
Zombie debt collectors have been known to use these underhanded tactics to try and collect on debts, even when the debt is no longer owed. You need to be aware of your rights when it comes to debt collection so that you can understand when you are still responsible for a debt.
The Types Of Debt Zombie Debt Collectors Try To Collect
Debt collectors may attempt to collect on any type of debt, but some debts are more common than others. Here are some of the most common types of debts that debt collectors may try to collect:
Settled Or Discharged Debts
After going through Chapter 7 bankruptcy, some debts may be discharged. This means that the person is no longer responsible for paying back said debt. For a settled debt, there should be a written agreement stating that the person is no longer legally responsible for the debt.
Time-Barred Debt
Debt collectors can only sue you for debts that are within the statute of limitations. This varies depending on the state you live in and the type of debt, but it is typically between three and ten years. Federal student loans are the only type of debt that does not have a statute of limitations.
Expired Debts On Your Credit Report
A negative item on your credit reports, such as a collection or late payment, can stay on your report for up to seven years. However, making a payment on a zombie debt, or even agreeing to do so, can restart the seven-year clock.
Debt That’s Not Yours
Identity theft is one of the most serious risks you face when dealing with debt collectors. Someone could easily mistake you for someone else, or steal your identity and make fraudulent charges in your name.
The Best Way To Avoid Zombie Debt
There’s no need to be scared of zombie debt – as long as you know the law and do your research, you can easily protect yourself from being scammed. By knowing the law and doing your research, you can easily spot when someone is trying to scam you.
1. Investigate The Debt
The original debt may have been owed to someone else and you may not be responsible for it. You may have been contacted by mistake about a charge that you don’t recognize.
2. Ask For Debt Validation
The best way to determine whether a debt is yours is to request a validation notice from the creditor. This notice will include the amount of the debt, the original creditor, and when the debt was incurred. Compare this information to your records to confirm whether the debt is yours. Once you have verified that the debt is indeed yours, you can send a dispute letter to the creditor.
3. Decide What Your Next Move Will Be
You can dispute a debt that has been paid by sending a letter to the creditor. The debt collector will need to provide proof that the debt is yours, but they may leave you alone without it.
You can improve your credit score by disputing any inaccuracies on your credit report with the three major credit bureaus: TransUnion, Experian, and Equifax.
You may find yourself in a situation where you are being contacted by a debt collector for a debt that is not yours or is invalid. In this case, ask the debt collector to send verification of the debt. This will help you determine whether or not the debt is legitimate.
It’s important to understand your rights when you owe money that you can’t pay. The FDCPA provides protections for consumers, and it’s worth considering negotiating with your creditor to settle for less than the full amount owed. Make sure to get any agreement in writing, and be aware of how paying off the debt may impact your credit score.
AnnualCreditReport.com provides free credit reports from the three major credit bureaus. Consumers are entitled to one free report from each bureau every year.
There are a few things to consider when you can’t pay your debts. One option is to try and negotiate a lower payment or payment plan with the debt collector. Another thing to think about is not paying at all until you are able. This may negatively impact your credit score, but it’s something to consider. Lastly, filing for bankruptcy might be an option that can free you from responsibility for your debts.
It is important to keep a written record of all correspondence with a debt collector, in case you need to take legal action at a later date. This way, you will have evidence to back up your claim.
4. Ask The Debt Collector To Stop Contacting You
The Fair Debt Collection Practices Act (FDCPA) gives you the right to tell a debt collector not to contact you. The best way to do this is to send the collector a certified letter with a return receipt, so you can confirm it has been received. The Consumer Financial Protection Bureau (CFPB) has sample letters on its website that can help you create your own.
Debt collectors who violate the FDCPA by harassing or threatening consumers may be reported to the CFPB or state attorney general’s office, or sued in state or federal court.
5. Avoid Sharing Any Information Or Admitting To The Debt
Zombie debt can be a real pain, especially when it’s not even listed on your credit report. In some cases, it may be best to simply ignore the debt and hope it goes away. Of course, you will still be legally responsible for the debt in some states, but at least you won’t have to worry about it haunting you anymore.
How To Avoid Zombie Debt
The best way to prevent your debt from becoming “zombie debt” is by staying on top of your payments and keeping good records of your payment history. But sometimes, even when you’re doing everything right, it can be tough to repay multiple debts. In that case, consolidating your debt into one monthly payment with a lower interest rate can be a big help.
There are lots of ways to develop a repayment plan that fits your budget, including using a debt payoff calculator.
The Bottom Line
You are not legally required to repay a debt that has expired, been paid off, or does not belong to you. However, it can be difficult to determine whether a debt is yours or has expired. You may want to ask the collector for the age of the debt or do your own research. Dispute the debt with the credit bureaus or creditor immediately if you find that an error has been made.
You could consider paying it off if the zombie debt does belong to you and is still listed on your credit report, or settling with the original creditor or debt collector to pay less than what’s owed.
