Having just observed another Halloween, I thought this might be a good time to discuss the evils of “Zombie Debt.”
What is zombie debt?
Zombie debt is defined by Investopedia as “debt that has fallen off your credit report but, for various reasons, someone is still trying to collect. Zombie debt has often been long forgotten and has probably been written off as uncollectible. But zombie debt can rise from the grave if a debt collector attempts to collect on it all over again, even when the debt is too old to legally pursue.”
The usual way we see this situation arise is that a prospective client will come to one of our offices and tell us that they are being called or hounded in writing to pay a debt and they have no idea what the debt is for. Our first piece of advice is to absolutely NOT pay a debt if you don’t know where it came from and that you dispute. Paying a zombie debt can wreak havoc on your credit reports and credit scores even if everything else is good. A lot of times, in this type of scenario, the purported debt doesn’t even show up on a person’s credit report.
This recent article in the Washington Post explains in great detail the insidious nature of the industry that attempts to collect upon these debts. Also, if you want to read a very scary and disturbing book about the underbelly of this dirty debt buying world, I recommend that you get the book, Bad Paper, Halloween notwithstanding!
What happens if I make a payment on zombie debt?
On top of everything else as it relates to old debt, the simple act of paying a small amount on a purportedly owed debt can revive the statute of limitations. Here is what Alabama law says regarding reviving the statute of limitations: “No act, promise, or acknowledgment is sufficient to remove the bar to an action created by the provisions of this chapter, nor is such evidence of a new and continuing contract, except a partial payment, made upon the contract by the party sought to be charged before the bar is complete or an unconditional promise in writing signed by the party to be charged thereby. Alabama Code § 6-2-16. In layman’s terms, this means that the time period for collecting on an old debt starts over again every time a payment is made – even a small payment!
With this information, you can see why it is NEVER a good idea to pay even a tiny portion of an alleged debt you know nothing about. If you get phone calls about old debts that you know nothing about, ignore them! Don’t give out any personal information over the phone and don’t make any type of payment over the phone. If you feel compelled to say something to the caller, tell them to write to you about whatever they are calling you for and you’ll look at it IN WRITING only and not discuss anything over the phone. Then hang up the phone. Some disreputable collectors will even assert that you can be arrested for not paying a debt. Don’t believe them. If they are a legitimate debt collector, they’ll already have your mailing address so they very well may write you a letter. If you never receive a letter, then you can assume the initial phone call is a scam of some sort.
On the other hand, if you do get a letter regarding an old debt and/or one that has changed hands several times, please let us look at it first before you do anything! Remember that making even a tiny payment on a debt can revive the statute of limitations!
Here’s how you know the letter is weird regarding an alleged debt and that it may be old and attempting to revive the statute of limitations:
- If it lists several names as owner or previous owners of the debt.
- If, as part of the payment it is demanding, the letter offers “Savings Plans for you to take care of your debt obligation.”
- At the same time, the letter may tell you somewhere that the law limits how long you can be sued on a debt. It may also say that, because of the age of the debt, they will not sue you for it. The letter may also say that the debt collector will not report the debt to any credit reporting agency and it may also say that making a partial payment on the debt may restart the statute of limitations on the debt.
If you get any letters that look strange, weird or confusing to you, please let us see those letters! Our lawyers have experience in suing debt collectors for deceptive letters under the Fair Debt Collection Practices Act (FDCPA). We like to look at all debt collection letters from anyone who is receiving them. This applies to someone who is considering bankruptcy and for someone who is not considering bankruptcy but is only receiving collection letters on one or two debts. Please gather up your collection letters and contact our office nearest to you so that we can set up a free and private consultation with one of our licensed attorneys in order to allow us to evaluate the debt collection letters you are receiving and your situation. When you come to us, please bring to us all of the letters and envelopes that you have. Remember to keep ALL of your collection letters so that we can look at them. No one likes to get collection letters from debt collectors so let’s see if we can do something about them!
Also, here are some other blog posts that will give you further information about the FDCPA.