When you leave a legitimate debt unpaid, it canâ€™t simply be written off as dead, even though significant time may have passed. It can come back to haunt you, like a zombie rising from the grave. When that happens, itâ€™s called zombie debt.For many consumers, the news that a zombie debt has arisen arrives by phone with a call from someone trying to collect payment from you. Or it may come through the mail, or via text message.
Even people who have no unpaid debts may get a collection call or letter. â€śEvery old account youâ€™ve ever had can come back to haunt you,â€ť said Steve Rhode, otherwise known as the â€śGet Out of Debt Guy.â€ť â€śJust because someone makes a claim (that) you owe an old debt, doesnâ€™t mean you do or that the balance is correct.â€ť
So while debt collection calls can be alarming and unwelcome, you might not be on the hook to pay anything.
Follow these steps if zombie debt is chasing after you:
The first tactic for anyone who gets contacted about a debt: Donâ€™t offer any information or agree to anything before you find out all the relevant facts.
â€śWhen an old debt resurfaces, it is a request for payment,â€ť Rhode said. â€śAs a smart consumer, you should investigate the matter and gather facts so you can make an educated decision if this is just a ploy to trick you to pay money you donâ€™t owe, or a legitimate claim.â€ť
The reason: Some debt collection scammers attempt to collect debts that arenâ€™t owed, or to gather personal information. So if you are contacted, donâ€™t correct an incorrect phone number or other personal information.
The next step is to get all the information and documentation so you can determine if you are responsible for paying the debt.
â€śTo investigate the debt you should first never admit the debt is yours or valid while you investigate. A collector can use that against you. Instead, you should politely ask the collector to prove you owe the debt. This is called debt validation.â€ť
Donâ€™t have any discussions until you get the debt validation. Do this whether or not you think the debt is valid, and get the paper trail started. It also buys you a little time.
Within five days of initial contact with you, the debt collector must provide the following information in a debt validation letter:
If you still donâ€™t recognize the debt after getting the letter of validation, research the company thatâ€™s trying to collect.
Get the collectorâ€™s name, and the name, address and phone number of the company. Any legitimate company will provide this information. Look up all the information on the internet. See if the Consumer Financial Protection Bureau has any record of problems with the collector.
Also reach out to the original creditor and see if the claim is valid and if the collector is authorized to collect this debt. You can also request a copy of your credit report to see if the debt is on it.
If it is a valid, unpaid debt, look up the statute of limitations.
The debt collector canâ€™t sue if your debt is past the statute of limitations, which differs from state to state and by debt type. (The four categories of debt are oral agreements, written contracts, promissory notes, and open ended accounts.) It usually begins when you first miss a payment on a debt.
The lengths vary by state and can be as short as three years for a written contract in six states including Delaware and the Carolinas, or as long as 15 years for written contracts in Ohio.
Whenever that period is over in your state, the debt is considered â€śtime-barred.â€ť Keep in mind that because the statute of limitations has passed doesnâ€™t mean creditors canâ€™t try to collect on time-barred debts, it just means that they canâ€™t sue. If itâ€™s not too old, that negative information may also stay on your credit report, typically for seven years.
So, if itâ€™s time-barred, and you donâ€™t have to pay, should you pay? Thatâ€™s your decision to make. You may want to close that debt if itâ€™s affecting your credit score (check your credit report).
But be careful about making a payment on an old debt. Depending on location, if you make a payment or even acknowledge your debt in writing, that could reset your statute of limitations. In some states, itâ€™s considered â€śrevivedâ€ť (in additional zombie-evocative terminology). Then they would be allowed to sue, and possibly also get interest and fees.
If you do get sued for a time-barred debt, donâ€™t ignore it or the judgment could go against you. Show your debt verification, and show your proof of your last payment.
Within 30 days of getting your validation notice, you must respond to the collector, stating specifically why you donâ€™t think you owe this debt (assuming it isnâ€™t yours). Make a copy of the letter and consider sending it via certified mail with a return receipt. The collector must then stop contacting you, unless they can document verification of the debt.
If the debt appears erroneously on your credit report, you should dispute that as well.
If you do owe the debt, and itâ€™s within the statute of limitations, work out a repayment plan.
If you can pay the debt, itâ€™s time to pay so you can go forward with a clear record. If not, you may be able to work with the collector and pay it off for a lower amount. Just be sure to get the terms of the agreement in writing stating it releases you from obligation. Keep a record of your payments.
If you need to contact a debt collector, you may want to consider using any of one these sample letters provided by the CFPB. These letters may be useful for the following situations:
Keep copies of any letters you send, and consider sending them via certified mail with a return receipt to document the collector receiving it.
The Fair Debt Collection Practices Act (FDCPA) went into effect in 1978 to regulate debt collection and prevent abusive collection tactics. Today, itâ€™s mainly enforced by the CFPB.
Among its practices: Debt collectors must contact you at convenient times, between 8 a.m. and 9 p.m., unless you agree to another arrangement.
The FDCPA forbids many other abusive, deceptive or unfair collection practices as well. When trying to collect a debt, debt collectors canâ€™t harass or use profane language. They canâ€™t threaten arrest.
Debt collectors canâ€™t call you at work if they are told you canâ€™t take calls there. They may contact others (such as neighbors and friends) to locate you, but typically only once. They can, however, discuss the debt with your spouse.
They canâ€™t call over and over intending to annoy you, or communicate or leave a message in a way that might be seen or heard by others than the intended recipient. They cannot publish debtorsâ€™ names on a bad debt list.
Essentially, if a debt collector is behaving disrespectfully, aggressively or in a manner or that you suspect is dishonest, take a look at the FDCPA to see if itâ€™s legal. The CFPB also collects complaints about debt collection problems and about specific debt collectors, and will contact the company collecting to determine next steps. Consumers can also see if others have had similar experiences with those companies.
You can also report problems with debt collectors to your state attorney generalâ€™s office and to the Federal Trade Commission online or by phone at 1-877-382-4357.
If you believe the debt collector has broken the law, you can sue within one year of the activity. Consumers can sue for any damages they can prove or they may be awarded up to $1,000 plus reimbursement of attorney and court costs, or a class action lawsuit may be awarded up to the lesser amount of $500,000 or 1 percent of the collectorâ€™s net worth. If your debt is valid and within the statute of limitations, suing the collector will not erase the responsibility for paying it.
If you get a dread-inducing phone call or letter informing you of collection of an old debt, the manner in which you respond is crucial.
â€śContact from a debt collector can be stressful and frightening,â€ť Rhode said. â€śBut keep in mind the initial contact is just a request for payment and may not be based on the accurate or factual information. Iâ€™m blown away all the time with the number of people who just assume the collector is correct or who fail to show (up) in court when they are sued over a debt they donâ€™t owe and lose by default.â€ť
But if you are well informed, thereâ€™s a much better chance you can turn matters in your favor.
â€śIf you want a successful outcome, you must get involved, take action, participate, and approach it like you are gathering facts and avoid getting hostile or emotional until all the data is in.â€ť
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