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Have you received recent phone calls or collection notices in the mail claiming that a very old debt has never been paid? It has become so common that a name has been created for it – “zombie debt”. The name helps identify the debt that was “raised from the dead”, so to speak. It could be something that you never owed at all.
When a person does not pay a debt, the lender will take action – by phone, letter, or even through court proceedings – to collect the money owed to them. In some cases, however, the debtor simply cannot pay or cannot be found. In other cases, the debtor files for bankruptcy and, depending on the type of debt, the debt may be suspended, renegotiated or paid off completely.
Sometimes that old debt comes back to life. Some of the most common zombie debt scenarios are as follows:
* Unpaid debts that exceed the statute of limitations when you can be sued for payment
* Unpaid debts you owe but forgot
* Unpaid debts cleared by bankruptcy
* Debts that you have already settled with the creditor
* Fraudulent charges of identity theft
* Fake debts that “creditors” claim you owe in a scam
How does debt come back to life?
Creditors often remove old debts from their ledgers and sell them to third party collectors. In some cases, debts are legitimate, but in others, they are not. When debts are sold and resold, records may be incomplete or inaccurate. Think of it as a “phone” game. The more a debt is transmitted, the more likely it is that the associated information is incorrect.
When debt collectors call
The legal treatment of old debts will depend on where you live and the type of debt in question. By law, debt collectors are not allowed to sue for old debts if the statute of limitations has expired. They are still allowed to contact you and request repayment of the old debt. In Georgia and Tennessee, the statute of limitations for most debt is six years.
However, if you start making payments or acknowledging the debt in some way, the action may restore the collection agency’s legal right to take the matter to court. Never agree to make a payment on a debt you aren’t sure about until you have had time to find it – even if the collection agency is pushing for payment.
The best way to start is to do a thorough investigation. Search old records to find bank statements and payment advices. Gather as much facts as you can about the debt in question. Then, within 35 days of first contact and without acknowledging that the debt is yours, ask the creditor for a debt validation letter. The Fair Debt Collection Practices Act (FDCPA) requires that the collection agency provide you with written proof of the validity of the debt or a judgment against you, as well as the name and address of the original creditor if the debt has been resold. . Once you have gathered this information, determine if the debt is really yours and if it still needs to be paid.
If you determine that the debt was yours, but you’ve already paid it off, write a letter to the collection agency and ask them to stop all contact. Include proof of payment if available. The collection agency is legally bound to stop contacting you under the FDCPA.
If you determine that the debt is not yours or is invalid, write a letter disputing its validity and, if applicable, include any evidence you may have.
If you determine that you owe the funds and can pay the debt, resolve the issue by first getting a written payment agreement and then clearing your unresolved debt.
If you determine that you owe the funds but cannot pay the debt, we encourage you to seek credit counseling through a licensed agency.
When deciding which way to go, keep in mind that once a debt has passed the statute of limitations, collectors can no longer sue you for payment. Additionally, the FDCPA states that all unpaid debts must be removed from a person’s credit rating after seven years. If you decide to start paying or pay off an old debt in full, it could jumpstart the statute of limitations and affect your credit.
Useful resources
Sample letters are available from the Consumer Financial Protection Bureau. If you need to contact a collection agency to dispute a debt, request a debt validation letter, or ask the collection agency to stop contacting, you can use templates on Consumer.gov.
Take advantage of BBB’s free shredding events to safely shred and dispose of old invoices and other documents you no longer need. Your BBB partners with local businesses and agencies to co-host these events twice a year. The next one will take place this Saturday, October 30 at Metro Tab Church, Church 2101 Shepherd Rd (intersection of Shepherd and Highway 153).
In addition to free document shredding, you can take advantage of free hard drive destruction and recycle electronics, including computers, laptops, and flat panel monitors. Law enforcement officials will also be on hand to pick up unnecessary prescription drugs.
The event runs from 9 a.m. to noon, however, document shredding will end earlier if the trucks fill up, so we encourage you to arrive within the first hour. We are in the process of planning more shredding events for April 2022.
For more information, please visit bbb.org/chattanooga or dial 423-266-6144.
Michele Mason is President of the Better Business Bureau of Southeast Tennessee and Northwest Georgia
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