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zombie debt collector

***Update: See the 4/2/12 post on recent Court of Appeals cases related to the statute of limitations for debt collection in Oregon***

We’ve been getting a run of questions from people who want to know the statute of limitations on their consumer debts, but the length of this blog post got away from me once I realized how interesting (and relevant!) this subject is in these tumultuous days of #8220;lendor industry meltdown,#8221; though the little guy, once again, may be getting short shrift.

If you are contacted about a debt (paid or unpaid), our recommendations:

1) Take it seriously, very seriously, and prepare to do some research

2) Research the Oregon laws to find the statute of limitations and debt collection laws

3) Read LASO and OSB materials on debt and related consumer law issues

4) Visit your library and read self-help books on debt and debt collection

(Coincidentally, this past Sunday’s Parade Magazine also had an article about these same debt and statutes of limitation issues:

Excerpt: “… Don’t pay money you don’t owe: Because debt collectors often are working with old data that have been through many hands, their records are sometimes wrong. If you don’t believe you owe the money or if the amount claimed by the debt collector is incorrect, dispute the claim in writing. The collector is obligated to show you some proof that you owe the money—at least a statement from the original creditor attesting that the information is correct. If the collector is calling about a debt you incurred long ago, be aware of the statute of limitations. Like a gallon of milk with a “sell by” date, debt can become too old to be useful to collectors. The statute of limitations differs from state to state but typically runs three to six years. After that, a debt collector can’t sue to collect a debt. If a collection agency states or implies that you have to pay a debt whose age exceeds the statute of limitations, it has broken the law. Always check the date of your debt: Paying even a small portion of an expired debt may reaffirm the debt and trigger the obligation to repay it in full. #8230;#8221; (read full article).)

“Zombie debt gets its name because the debts in question are supposed to be dead and buried since:

1) They#8217;ve been settled in bankruptcy proceedings.

2) They#8217;re the result of mistaken identity or identity theft, so they were never your responsibility to begin with.

3) Their statute of limitations has expired.

These debts are reanimated by collection agencies hoping to make some extra profits.

You know the guy in the B movie who seals his own doom by panicking and getting himself cornered by the relentless zombie army? Zombie debt collectors expect you to be that guy. They make their profits from consumers who don#8217;t know their rights, don#8217;t know how to protect themselves, and panic….” (link to full article)

Read more about “Zombie” Debt:

2) And another article here, and here, and here. The Zombies Really ARE Here!

3) And a longer report from the FTC: on Collecting Consumer Debts: The Challenges of Change, by the National Consumer Law Center, on behalf of its Low Income Clients and the National Association of Consumer Advocates, June 6, 2007

zombie debt collector

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Debt collectors can still come after you for zombie debt

Channel 2 Consumer Adviser Clark Howard reports on how you could have to pay for debts you no longer owe. | 9 On Your Side - Fight back against zombie debt collectors

@Michael Bovee - What is Zombie Debt and can it still affect you? Save More, Spend Less - Struggling to pay off a huge debt? This story is for you.

@HLN - 'I paid off $26,500 in debt in two years'

@The Clark Howard Show - The Clank Howard Show: New debt collection rules (Save Money) ✱ Sept 5, 2016

@911creditpros - 3 Reasons Why You Should Not Pay Your Debt Save More, Spend Less - Saddled with debt? Here are ways to get free assistance | Clark Howard

@Explosive Venture - WSB-2 (Clark Howard) Visit

@John Skiba - A Bankruptcy Lawyer's Take on Dave Ramsey

@Ownage Pranks - Racist Guy Explodes on Debt Collectors - Ownage Pranks

@CBS Evening News - Are Americans haunted by “zombie debt”?

@Dan Willis - Charge Off - The Inside Scoop

@WSB-TV - Georgia cop to driver: We only kill black people.

@The Dave Ramsey Show - Credit card debt is over $80k

@SimplyMoneyMedia - Simply Money: Beware of zombie debt!

@John Skiba - Don't Transfer Assets Prior to Filing Bankruptcy

@The Majority Report with Sam Seder - Karen Handel: 'I Do Not Support a Livable Wage'


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Can Debt Collectors Extend Statute of Limitations on Zombie Debts?

Zombie debt collector

Zombie debt collector

#8220;Zombie debts,#8221; or bad debts that have been around for years, have a statute of limitations on when a creditor can sue for payment.

The statute of limitations varies by state, but it#8217;s typically six years for being sued, and seven years for the debt being reported on a credit report, says Shane A. McClelland, a consumer lawyer in Ohio who focuses on defending against debt collection. The range for most states is three to 10 years.

A debt collector who threatens to sue after the statute of limitations has expired is violating the Fair Debt Collection Practices Act.

There are a few ways the statute of limitations can be extended, and debt collectors can continue going after the debt even after the time has passed. They can still seek voluntary payment even though the law can#8217;t force a debtor to pay.

But collectors can#8217;t extend the statute of limitations and legally require debtors to pay by passing the legal rights to the debt to another collector, say McClelland and other attorneys.

Why zombie debts are chased after

Even if the statute of limitations has expired on debts, collectors can still legally seek the money, although they may have a harder time collecting it without a winning lawsuit in hand.

[pull_quote align=#8221;left#8221;]#8221;Often times we see people come through our practice with a debt from 10 years ago, or a debt they thought was paid off years ago,#8221; says Shane A. McClelland, a consumer lawyer in Ohio.[/pull_quote]Some people want to pay off their debt, or they can be pressured by a collector to make payments and be scared of ruining their credit.

#8220;Often times we see people come through our practice with a debt from 10 years ago, or a debt they thought was paid off years ago,#8221; McClelland says.

#8220;In the end these collection companies bundle loads of consumers together and then sell them to third-party debt collection agencies for pennies on the dollar, to at least try to make some money off the collection efforts,#8221; he says.

How statute of limitations is extended

If the statute of limitations is about to expire and the bill collector convinces the debtor to make only a small payment, then the clock starts again on being required to legally pay the debt.

#8220;Very rarely do statutes get extended,#8221; says Clint Sallee, CEO and president of Fidelity Creditor Service, a collection agency headquartered in Glendale, Calif. The reason is, Sallee says, is that people who make payments want to pay the debt off, and those who don#8217;t make payments don#8217;t want to pay the debt off.

With a court order obtained before the statute of limitations on debt runs out, debt collectors can attach assets of the debtor, such as garnishing wages, bank accounts and putting liens on homes.

#8220;A judgment is going to be a little more powerful. It#8217;s going to be very valuable to creditors,#8221; says Colin Mabrito, an attorney in Houston, Texas, where the statute of limitations on debt lawsuits is four years.

The statute of limitations is also extended when a plaintiff wins a court order, with a judgment being good for 10 years, Sallee says. The judgment can be renewed every 10 years until the debt is paid, he says.

California has a statute of limitations of four years when a court order can be issued to pay a debt. The clock on when a lawsuit can be filed for a debt starts when services are rendered such as the date of an ambulance ride that wasn#8217;t paid for or the bank chargeoff date, Sallee says. The chargeoff is when a bank deems an account uncollectible, which is usually 180 days after the last payment.

A debt collector can send letters and make phone calls to debtors long after they#8217;ve lost the legal right to sue, Mabrito says. During the time when they can sue, a debt for less than $1,000 is rarely worth suing over, he says.

[pull_quote align=#8221;left#8221;]#8221;The older debt you get the less likely you are going to be trying to collect from them,#8221; says Colin Mabrito, an attorney in Houston, Texas.[/pull_quote]#8221;The older debt you get the less likely you are going to be trying to collect from them,#8221; Mabrito says, partly because the debtor is unlikely to pay something that they haven#8217;t paid for years anyway.

Some debts can take decades to recover, but can be worthwhile for collectors when late fees and interest charges are added up, says Sallee, the collection agency chief.

#8220;It#8217;s a last resort. We#8217;d much rather get the money without litigation,#8221; he says.

His company won a judgment in 1968 against a Southern California woman and put a lien on her property for an unpaid credit card debt of $1,756, Sallee says. It just recently collected the debt totaling $68,000 with 10% annual interest charges since 1968 when the woman died and her family sold the property that still had the creditor#8217;s lien on it.

Collecting on a property lien is rare because there usually isn#8217;t enough home equity to make a lawsuit worthwhile, he says.

Lawsuits can be dismissed if the time required to file a lawsuit has passed. Debt collectors can most easily win a lawsuit through a default judgment, meaning the defendant didn#8217;t respond to the suit.

#8220;You don#8217;t want to let them get a default judgment against you,#8221; says Mabrito, a lawyer. #8220;You want to defend yourself.#8221;