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
You may have to kill old debts that resurrect and come back to life. Junk
debt buyers and collection agencies will purchase old, often outdated debts
for pennies on the dollar and come after you for payment of these old
debts. These outdated debts are known as zombie debt.
debt buyers and collection agencies will purchase old, often outdated debts
for pennies on the dollar and come after you for payment of these old
debts. These outdated debts are known as zombie debt.
Debt buying has emerged into a multi-billion dollar industry in the past
several years. 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 a debt you are unaware of, here are a few
things you can do:
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.
several years. 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 a debt you are unaware of, here are a few
things you can do:
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.
Disputes
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
Collection Agencies
Information on Effectively Dealing with
Collection Agencies
Get Deletions
Request deletions when paying a negative
account. Paid collections do not improve
your credit scores.
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
Collection Agencies
Information on Effectively Dealing with
Collection Agencies
Get Deletions
Request deletions when paying a negative
account. Paid collections do not improve
your credit scores.
More Resources
| Copyright RebuildCreditScores 2010 All Rights Reserved |
Links
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 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.
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 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 may include
outdated past debts,
charged-off debt, debt
included in bankruptcy,
debt you may have never
owed and even debts
incurred due to identity
theft. Many of these debts
are well past the statute of
limitations and uncollectible.
outdated past debts,
charged-off debt, debt
included in bankruptcy,
debt you may have never
owed and even debts
incurred due to identity
theft. Many of these debts
are well past the statute of
limitations and uncollectible.
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