Zombie Debt: How to Deal with Old Debt that
Comes Back to Haunt You
by Lisa Phillips
May 2008
Comes Back to Haunt You
by Lisa Phillips
May 2008
| Copyright RebuildCreditScores 2008. All Rights Reserved |
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You may have to kill old debts that resurrect and come back to life. Zombie debt may include
past debts that you owe, charged-off debt, debt included in bankruptcy, debt you may have
never owed and even debts incurred due to identity theft.
past debts that you owe, charged-off debt, debt included in bankruptcy, debt you may have
never owed and even debts incurred due to identity theft.
1. Do not acknowledge you owe the debt.
Simply acknowledging the debt or agreeing to pay a portion of the debt can ruin your credit.
Negative marks can stay on your credit for up to 7 years. By paying a portion of that debt you
restart the 7 year clock. If you are nearing the 7 year mark it may be best to do nothing at all. Let
it drop from your credit reports.
2. Ignore the phone calls completely.
Talking to them may open up a can of worms. Speaking with debt collectors may end up
restarting or extending the statute of limitations on the debt in addition to restarting the time
period a negative mark can stay on your credit. Remember, if the statute of limitations has run
on a debt you cannot be sued for that debt. See Statute of Limitations.
3. Stop the calls.
If the telephone calls continue, immediately write a letter, certified, return receipt, demanding the
collection agency cease all telephonic contact with you. Make sure you clearly state in the letter
that you do not agree you owe the debt nor are you acknowledging you owe the debt. Federal
law dictates collection agencies must comply when you request they do not contact you via
telephone.
4. Check your credit reports.
Collection agencies will often stoop to low, illegal tactics to try to get you to pay a debt. Watch out
for re-aging of the old debt on your credit reports. The collection agencies will report the old debt
to the credit bureaus as a new debt and try to extend the seven-year reporting limit on negative
items. Remember, negative items such as late payments and charge-offs can only be reported
on your credit report for 7 years. Bankruptcies can be reported for 10 years and unpaid tax liens
can stay up to 15 years.
5. Debt Validation.
Request the collection agency validate the debt. Debt validation forces the debt collector to
produce a copy of the original signed contract such as the credit card agreement and the
account history of the debt. They cannot simply produce some printed copy of their bill or
invoice, it must be from the original creditor. Also, request proof they are licensed in your State to
perform debt collection. If the collection agency cannot produce proof you owe the debt, they are
violating the Fair Debt Collection Practices Act and can be sued. And, any negative entry they
reported to the credit bureaus regarding this debt must be removed from your credit reports.
6. Negotiate cautiously.
If you want to pay the debt, be very careful in your negotiations and get everything in writing.
Remember the collection agencies purchased the debt for pennies on the dollar so anything you
offer over that amount is all profit. You want to proceed with intense caution because collection
agencies are tricky. Debt collectors may settle for a smaller amount then turn around and sell the
remaining debt to another collection agency or even worse, the collection agency could report
the remainder of the debt to the IRS as “income”. See Debt Settlement for more information.
7. Beware of false promises by the collection agency.
Not surprisingly, some debt collectors use dirty, underhanded tactics to collect debt. Many simply
lie to the consumer and promise to remove negative credit entries in exchange for payment.
Know your rights and get everything in writing. Always negotiate a full deletion of any and all
negative entries reported on your credit report of this debt. Cover your bases and make sure the
debt collector is not going to sell the unpaid portion of the debt to another company.
Simply acknowledging the debt or agreeing to pay a portion of the debt can ruin your credit.
Negative marks can stay on your credit for up to 7 years. By paying a portion of that debt you
restart the 7 year clock. If you are nearing the 7 year mark it may be best to do nothing at all. Let
it drop from your credit reports.
2. Ignore the phone calls completely.
Talking to them may open up a can of worms. Speaking with debt collectors may end up
restarting or extending the statute of limitations on the debt in addition to restarting the time
period a negative mark can stay on your credit. Remember, if the statute of limitations has run
on a debt you cannot be sued for that debt. See Statute of Limitations.
3. Stop the calls.
If the telephone calls continue, immediately write a letter, certified, return receipt, demanding the
collection agency cease all telephonic contact with you. Make sure you clearly state in the letter
that you do not agree you owe the debt nor are you acknowledging you owe the debt. Federal
law dictates collection agencies must comply when you request they do not contact you via
telephone.
4. Check your credit reports.
Collection agencies will often stoop to low, illegal tactics to try to get you to pay a debt. Watch out
for re-aging of the old debt on your credit reports. The collection agencies will report the old debt
to the credit bureaus as a new debt and try to extend the seven-year reporting limit on negative
items. Remember, negative items such as late payments and charge-offs can only be reported
on your credit report for 7 years. Bankruptcies can be reported for 10 years and unpaid tax liens
can stay up to 15 years.
5. Debt Validation.
Request the collection agency validate the debt. Debt validation forces the debt collector to
produce a copy of the original signed contract such as the credit card agreement and the
account history of the debt. They cannot simply produce some printed copy of their bill or
invoice, it must be from the original creditor. Also, request proof they are licensed in your State to
perform debt collection. If the collection agency cannot produce proof you owe the debt, they are
violating the Fair Debt Collection Practices Act and can be sued. And, any negative entry they
reported to the credit bureaus regarding this debt must be removed from your credit reports.
6. Negotiate cautiously.
If you want to pay the debt, be very careful in your negotiations and get everything in writing.
Remember the collection agencies purchased the debt for pennies on the dollar so anything you
offer over that amount is all profit. You want to proceed with intense caution because collection
agencies are tricky. Debt collectors may settle for a smaller amount then turn around and sell the
remaining debt to another collection agency or even worse, the collection agency could report
the remainder of the debt to the IRS as “income”. See Debt Settlement for more information.
7. Beware of false promises by the collection agency.
Not surprisingly, some debt collectors use dirty, underhanded tactics to collect debt. Many simply
lie to the consumer and promise to remove negative credit entries in exchange for payment.
Know your rights and get everything in writing. Always negotiate a full deletion of any and all
negative entries reported on your credit report of this debt. Cover your bases and make sure the
debt collector is not going to sell the unpaid portion of the debt to another company.
Zombie debt involves collection agencies
purchasing debts for pennies on the dollar that
original creditors have written off as bad debt and
often times the statute of limitations has already
run. Debt buying has emerged into a multi-billion
dollar industry in the past several years and from
the looks of it, the industry will only continue to
expand.
Junk debt buyers can be small businesses to large,
publicly traded Wallstreet companies and the
characters involved in this lucrative business are
banking on the consumer not knowing their rights. If
you are contacted about an old debt or debt you
are unaware of, here are a few things you can do:
purchasing debts for pennies on the dollar that
original creditors have written off as bad debt and
often times the statute of limitations has already
run. Debt buying has emerged into a multi-billion
dollar industry in the past several years and from
the looks of it, the industry will only continue to
expand.
Junk debt buyers can be small businesses to large,
publicly traded Wallstreet companies and the
characters involved in this lucrative business are
banking on the consumer not knowing their rights. If
you are contacted about an old debt or debt you
are unaware of, here are a few things you can do:
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Related Topics
More Resources
Disputing information on your credit files
Tips for Disputing Negative information in your Credit Files.
Debt Validation
How to halt the collection process by requesting a collection agency to validate
your debt.
Get Deletions
Request Deletions when paying a negative account because paid collections do
not change your credit scores.
Your States Statute of Limitations
Learn the amount of time a creditor can sue you for a debt according to your State.
Tips for Disputing Negative information in your Credit Files.
Debt Validation
How to halt the collection process by requesting a collection agency to validate
your debt.
Get Deletions
Request Deletions when paying a negative account because paid collections do
not change your credit scores.
Your States Statute of Limitations
Learn the amount of time a creditor can sue you for a debt according to your State.
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