You’re being hounded. You thought that debt was gone for good, but collectors are closing in and demanding payment.
You may be facing zombie debt.
A zombie debt might be a dormant bill resurrected by debt collectors — or it could be something you never owed at all. Be careful: Making even a single payment on an old debt can bring it back from the dead. But don’t hide and hope it’ll go away, either. Fight back.
How zombie debt happens
Creditors regularly remove old debt from their books and sell it to third-party debt collectors for cents on the dollar. Collectors can profit even if they collect only a portion of the original debt, so that gives them incentive to resurrect old bills years after the debts were incurred.
Common sources of zombie debt:
- Debts you do owe but forgot about.
- Debts you already settled with a creditor.
- Fraudulent charges from identity theft.
- Debts wiped out in bankruptcy.
- Debts beyond the statute of limitations for when you can be sued for payment.
Why it’s dangerous
Zombie debt is old. “That in itself can pose a danger to consumers, especially when high-pressure collection tactics are being used, because it’s hard to verify if the old debt is legitimate,” says Colin Hector, staff attorney at the Federal Trade Commission.
As debts are sold and resold, information can decay, leading collectors to seek payment on erroneous debt. And making a payment on old debt can reset the statute of limitations, leaving you vulnerable to a lawsuit.
Debt collection is the largest source of consumer complaints to the Consumer Financial Protection Bureau, with over 85,000 complaints filed in 2015. The leading reason: being hounded for debts that consumers didn’t owe.
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How to slay an undead debt for good
Gather the facts: Consumers should “get as much information as possible before making a decision,” says April Kuehnhoff, staff attorney with the National Consumer Law Center. “Even if you’re feeling pressure during a phone call, don’t agree to make even a $20 payment.”
First, request what’s called a debt validation letter. It will outline details including the original creditor, the amount of the debt and how you can challenge it. This will help you verify that it is your debt and hasn’t already been paid.
Second, determine if the debt is past the statute of limitations by asking the debt collector or researching your state’s laws around time-barred debt. You cannot legally be sued for debt that’s past the statute of limitations, although collectors may still try.
Pick your method of attack
- If you already paid the debt: Write a letter to the collections agency demanding that it cease contact. The Fair Debt Collections Practices Act requires it to do so.
- If it’s not your debt or is otherwise invalid: Write a letter challenging the debt within 30 days of first contact.
- If you do owe the debt and can pay: Resolving an unpaid account can get it out of your life and perhaps help your credit score. Get any payment agreement in writing before sending money.
- If you do owe it and can’t pay: Pursue debt relief through credit counseling or bankruptcy.
No matter what, be proactive: Don’t ignore anything you receive in the mail from debt collectors, and get everything in writing.
Sean Pyles is a staff writer at NerdWallet, a personal finance website. Email: email@example.com.