1 wrong move can bring 'zombie' debt back from the grave

Zombie debt statute of limitations

Zombie debt is old debt that gets brought back to life. And it's linked to many consumer problems.

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 grave. But don’t hide and hope it’ll go away, either. Fight back.

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 the 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.

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.

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.

MORE: How to handle time-barred debt

MORE: 4 ways to find debt relief

MORE: 3 ways to pay off a debt in collections


Do Not Be Tricked By Unsavory Collectors

Unsavory collectors work to trick you into making payments so that they can essentially reactivate your debts. Don't fall for this ploy.

Protecting You From Shady Tactics

Bankruptcy attorney Christine Wolk has dealt with hundreds of creditors over the past 30 years. She knows which tactics are legal and which are not. She also recognizes creditors who attempt to trick unsuspecting people into what is known as zombie debt.

Zombie debt is uncollectible debt that may have been discharged in bankruptcy. Zombie debt is also debtВ in which the legal time during which the debt can be collected, has expired. Scavengers, known as debt buyers buy uncollectedВ debts for a fraction ofВ the debt's face value and then try to get people to pay them. Usually these debts are beyond the statue of limitations. These are debts for which you cannot be legally sued for because they have essentially expired.9quot; They may not even be yours. The debt collectors know this. They know they cannot legally collect unless the debt becomes active again. So they attempt to trick you into making a payment. Do not do this. Making a payment on a discharged debt or stale debt does not make it go away, it actually restarts the statue of limitations on that loan. This makes the loan collectable and you open yourself up to a lawsuit.

After 30 years of bankruptcy work Chris has the tools and knowledge to do to stop these zombie debt collectors. Chris educates you on how to handle collectors. She will:

  • Inform you and clarify your rights
  • Show you how to recognize which debts need to be paid and which are forgiven
  • Deal with the collectors and tell you how to handle any zombie or scavenger debt collectors in the future

The Scary Truth About Debt Scavengers

Debt scavengers may try to get you to pay debts incurred by identity theft or debts that belong to someone with the same or similar name. The collectors often make themselves sound like an attorney or law firm or make promises to leave you alone if you only pay a small amount. Chris will stop these unsavory characters and will aggressively pursue those collectors who overstep the law.

Call Wolk Law Office in Oshkosh today and speak to a lawyer about how to eliminate zombie debt. Call 920-385-5621. After hours you can email us and we will get in touch with you. We serve people in Wisconsin and throughout Winnebago County.


zombie debt statute of limitations

***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


Dawn of the Debt: How to Protect Yourself Against Zombie Debt

The Federal Trade Commission (FTC) defines zombie debt as “debt you think is dead, gone, and forgotten, but has somehow come back to life.” Zombie debt can be a result of a multitude of things, and knowing what it is, where it came from, and how to dispute it is critical.

If you are contacted by a debt collector to pay a debt, they may be talking about a zombie debt. Keep the following in mind when identifying zombie debt:

  • Debts that you already settled with a company or other debt collector
  • Debts that were discharged in bankruptcy
  • Time-barred debts you may have forgotten or overlooked that are past the statute of limitations
  • Debts that no longer show up on your credit report, generally after seven years
    • It’s important to get your free, annual credit report and to carefully examine it for any accounts that shouldn’t appear on your credit report but do.
  • Debts that you never actually owed, like as a result of identity theft

Why Should I Worry About Zombie Debt?

Zombie debt collection, and other illegal forms of debt collection, is a growing problem. In fact, it is such an issue that TV show host John Oliver recently had a segment about it on Last Week Tonight.

Debt collection agencies buy debts for pennies of the actual amount, and they turn around to force payment from you to make big bank. Debt collectors believe they can threaten, harass, or intimidate you to get you to pay the debt off. This is illegal, especially if the debt is actually zombie debt. Don’t let the debt collectors get away with breaking federal law.

Another reason to worry about zombie debt is if the account still appears on your credit report when it shouldn’t, it can bring your credit score down. This can result in issues like loss of employment and an increase in your mortgage.

Battling zombie debt can be intimidating, confusing, and frustrating, but don’t let the debt collection agency scare you. If the debt account matches at least one of the above traits, you don’t have to pay it and you can protect yourself from the zombie debt collector. The Federal Trade Commission lays out tips for what to do when contacted about zombie debt:

  • Verify that the debt is real. It could be a fake debt collector calling, so make sure you recognize the debt account. If it’s real (as in, it doesn’t match up with the above traits), it would show up on your free credit report.
  • Know your rights and protect yourself. Under the Fair Debt Collection Practices Act (FDCPA), you have protection from debt collectors from using abusive, unfair, or deceptive practices against you. These rights include when, where, and how a debt collector can contact you, who debt collectors can contact regarding you and your debt, what debt collectors need to tell you about your debt, which federal benefits are affected by debt, and so much more.
  • Don’t ignore lawsuits. If a debt collector files a lawsuit against you to collect zombie debt, respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.
  • Don’t accidentally reset the debt clock. The statute of limitations is your best friend when it comes to battling zombie debt. Making, or promising to make, a payment to a time-barred debt–a debt too old for a collector to force payment–can reset the statute of limitations. A debt collector can then sue you for the full debt amount, plus interest and fees.

Hire the Consumer Law Firm Francis Mailman To Fight Zombie Debt Collection

If you have been contacted by a debt collector to make payments on what you believe is a zombie debt, the attorneys at Francis Mailman are here to help. Call us toll-free at (877) 735-8600 or get your free case review today to get started.


Zombie Debt Collectors: Should You Pay?

Zombie debt statute of limitations

No, this isn’t the latest horror movie, this is something that has been going on and is now becoming a real problem for consumers. This expanding new industry has prompted a flood of complaints to state and federal agencies.

We all know what a debt collector is, this is about debt collectors who are attempting to collect zombie debts. Basically a zombie debt is a debt that is old and maybe you have forgotten about it. So you suddenly get this call out of the blue from a debt collector stating you owe this money. What usually happens is another debt collection agency buys an old debt from another agency for pennies on the dollar, and this new collection agency starts aggressively trying to collect.

Many times these debts weren’t even valid debts or for other reasons such as identity theft aren’t valid debts. The consumer with a lot of work finally gets it cleared up years ago, but somehow these new debt collectors get a hold of this debt and start trying to collect on it starting the whole mess over again.

Other times these collection agencies will buy old debts that were charged off a long time ago and then use a credit scoring search to determine who would be the most likely to pay these old debts. And if you are one of the lucky ones your phone will start ringing. Many of these debts are past the statute of limitations that they can even try and collect the debt. There is a statute of limitations (SOL) when past a certain amount of time it is too late to try and collect on a debt. Each state has their own statute of limitations for certain types of debts. Consumers are getting harassing calls now for debts as far back as the early 1990s.

Here are some of the worst abuses of these debt collectors at this time.

  • Constantly calling and badgering consumers about a debt that has already been paid or has been legally erased through a bankruptcy.
  • Illegally re-aging the debt on credit reports. What the collection agency does here is report to the credit reporting companies that this old debt is really a new debt, which extends the limit of reporting debts past the 7-year limit.
  • Threatening to sue or actually suing you for a debt that is past the statute of limitations.
  • They promise to delete the negative remarks on your credit report if you pay just a small portion of the debt. Be aware of this especially. If you only pay a part of the debt this resets the statute of limitations all over again. If you are going to negotiate a lower payment for the full amount, get this in writing first before paying anything if you owe the debt. Make sure it says full amount paid.

Know these Laws about Collections

When does the clock start ticking on a debt, usually it is 180 days after the account first goes delinquent or after you’ve missed your first payment. A negative report cannot stay on your credit report after 7 years (10 years for a bankruptcy).

On your credit report the clock should start ticking when it says date of last activity. But in some states you can restart the clock if you start making payments, agree to a payment plan or even acknowledge the debt is yours. You do not want to restart the clock unless you agree that the debt is yours, is not past your states SOL and the amount is correct. And you have all of this in writing from the collection agency.

Being threatened or actually being sued for a debt that is past your states statute of limitations is a violation of the federal Fair Debt Collections Practices Act (FDCPA). If sued you will have to go to court and show this. Never miss a court date. If you’ve moved to a different state, the rule of thumb is to go with your current states SOL. A credit card is usually considered an open-ended account established under the Truth-In-Lending Act.

Should You Pay These Old Debts?

You realize you owe this debt but the statute of limitations has run out, it is still a debt but under your state laws you don’t owe it anymore, but you would like to pay it. Be very careful about this. If you agree to pay and then suddenly you find you can’t pay, you have restarted the clock again and the collection agency can come after you legally and report it on your credit report.

Also, if you pay it can possibly be reported for the next 7 years on your credit report where if you don’t pay it, if would drop off much sooner if not already. And this of course can lower your credit score. You have little to gain and a lot to lose if you continue contact with these debt collectors and they know the SOL has run out. Paying an old debt can play havoc with your credit score.

If your conscious bothers you about never paying this debt than pay it. But make sure you get everything in writing. Do not deal over the phone. If your conscious is bothering you but you don’t want to risk your credit score by paying or talking to these debt collectors you could give the money to your favorite charity.

If you do owe this debt, you know it is yours and the amount is correct and your states statute of limitations is not up, don’t ignore the collection agency, they have a right to collect this debt. They are bound under the FDPCA of your state and the federal government.

If you continue to have problems with these zombie debt collectors and you either don’t owe the money and or the SOL has run out, contact an attorney.

2009 Sam Montana

Money Troubles: Legal Strategies to Cope with Your Debts by Robin Leonard