In the past, if you had debt and you were not able to pay it, there may be a possibility that those debts have been declared as ‘uncollectable’. In other words, it can be said that the company has stopped showing interest in collecting the debt and there can be two reasons responsible for it : the company didn’t show any interest in collecting it and secondly they had stopped bothering to get in touch with you.
However, of late, a new variety of debt collector has surfaced to purchase these old debts and they are leaving no stone unturned to collect them once again. The worst part is that you start receiving letters and phone calls asking you to make the payment for your debts. So, at this moment you should have all the information about the zombie debt and what you ought to do in order to deal with the collectors.
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What is ‘Zombie Debt’ ?
– In the situation where you are not able to pay the debt or you are not paying the debt deliberately the lender, on the other hand, can make you pay the debt using varied methods. These collectors can send you harassing letters, you can receive threatening phone calls or in the worst case even wage garnishment. There have instances in the past where the debtor has moved away or simply have no funds to pay the debt.
After a while, it can be a costly affair for the collector to continue making attempts for debt collection. The majority of the lenders don’t try collecting the debt after six years as it has already crossed the set limitations and you, as per the laws, you don’t have to pay the debt. However, even after so many years, these old debts enjoy some worth and if the old surety has stopped making efforts to get it paid, other companies take their place. These un-collectable debts are then sold, at a smaller amount, to other companies dealing in debt collection.
Even these zombie companies make a meager payment in order to have these debts, getting paid on even a small amount of the loans can prove profitable for such companies. As per an estimate, such companies pay around 3% of the face value of the loan. Let us say, in the case where the original debt is $1,000, the new creditor will make a payment of around $30. If the company can make even one person to repay $1,000 debt in full, it will end up covering the costs to over 30 identical loans.
Well most of the times, the debt is quite old and debtor have forgotten about it, and it may no longer be highlighted on your credit report. Or perhaps, the debtor has officially announced bankruptcy but didn’t remember to incorporate that debt in the bankruptcy plea. There is a fixed time period on how long a lender can try for the collection of the debt. While the debt remains valid after the set time period has passed, as per the law you are no longer required to make the payment for that debt.
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Time-Barred Debt Accounts for Debt Collection Activities
The most comprehensive data available about the age of debts being collected by debt buyers comes from a 2013 FTC study of the debt-buying practices of some of the nation’s largest debt buyers.
This study found that nearly 25 percent of debt acquired from the original creditor and more than 60 percent of debt purchased from other debt buyers was over three years old at the time of purchase.
More than 30 percent of the debt purchased from other debt buyers was over six years old.
Chased By A Zombie Debt – Tips To Get Rid Of Debt Scavengers
In order to save yourself from paying a zombie debt, you need to be familiar with the below-discussed steps –
- The debt collection company can be sent a certified letter asking them about the owning of the debt and asking them to prove it that you actually owe it.
- In case you receive a letter, you should keep it with you.
- You should not be talking for too long on the telephone. If in case you do get a call, you can ask them the address of the debt collection company and send them a letter.
- Make sure that you avoid having a discussion with the collector till the time you have received a judgment against you. The Fair Debt Collection Practices Act states that the debt collection company should provide you all the details.
- Make sure that you don’t accept that the debt is yours. There are strong odds that they can use this information against you.
When you have the details regarding the debt, you can decide on whether the time period, for paying the debt, has been crossed or whether it is your debt in real terms. At times, it can be because of some computer error, identity theft or some fraudulent method just to accumulate money from you.
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When the last time an activity is being registered on the debt is actually the last date when the statute of limitations for the debt actually begins. Generally, it is the last payment that you need to make. Under the guidelines of FDCPA you, as a debtor, cannot be sued for the collection of debt if it is more than six years. There is a set limit i.e. 7 years and when it is passed, the credit card debt should be removed from the credit reports.
Another letter should be sent to the debt collection company if they keep on contacting repeatedly. Since, majority of the zombie debts are beyond the limitations of set time period, the debt collection company might not be able to go ahead with the legal action.
Old Debt, Statute of Limitations on Debt
Letter to Collection Agency to Stop a Zombie Debt which is outside of the statute of limitations
This sample letter describes the collection agency to stop because the debt is outside of the statute of limitations, plea a cease and desist under the FDCPA – Download pdf
About paying the debt –
Once the set time limit, for paying the debt, has been crossed there is no way you are going to be benefited by paying the debt. The majority of the debt collection companies/agencies inspire the debtors to pay their debts through guilt, inculcating fear, lack of knowledge. But, it in the case where the debt has crossed the statute of limitations, which can differ significantly by debt’s nature and state, you don’t have to pay anything.
At times, these agencies may guide that you can pay less debt as compared to what you actually owe . But on the other hand, this can have a negative impact. Unless they have offered a written offer-in-compromise, paying any amount will still make you liable for the debt. This also means that any amount that you pay will end up restarting the statute of limitations.
If you really think that you should pay off the debt then you have every right to go ahead and do so, at the same time you have to be certain as who is actually benefiting. The money is not going to get transferred to the original lender instead it will go to the debt collection company/agency.
Fair Debt Collections Practices Act –
There is Fair Debt Collections Practices Act (FDCPA) that offer protection from getting harassed when these agencies collect the debt. The act also lays strict rules against the debt collection practices. In addition to others, setting a statute of limitations while the collection of the old debts is one of the most important ones.
- There is a provision in the law where the debt collectors are being refrained from passing on any lie regarding the debt or what can happen in the case when you don’t pay your debt.
- The debt collectors are also being prohibited from sharing any information about the debt that is incorrect.
- If the debt has been inactive for a minimum time period of six years, you cannot be sued for your debts. And the debt should also be removed from your credit report.
Make sure that you have verified the debt, this will surely save you from harassment. If the debt is too old, it is not mandatory to make the payment for the debt. Gain holistic information about statute of limitations in your area and see whether the debt is showing up on your credit report.