Nextwave Finance

Keeping “Zombie” Debt D.E.A.D

March 20th, 2008 | by rachel |

The spread of “zombie debt” means that millions of dollars of debt long forgotten may come back to haunt the people that owed it in the first place.  A distant relative of much hated debt collectors, 3rd party collectors buy bad debts for very low prices.  Whatever money is collected yields a large profit margin with little, if any overhead.  Like any collection process, there is a danger of collectors going too far and using questionable, if not overtly illegal practices.  If you have debt that might come back to life, follow these steps to make sure your “zombie” debt stays dead.

Determine liability

Debt becomes delinquent through a number of avenues.  Uncollected money that is charged off by a creditor and/or debt that is incurred by identity theft are the 2 most common forms of debt that goes dormant.  The debt, although sometimes written off, is still owed.  Until the statute of limitations runs out, that debt can still be collected legally.  Each state sets its own statute of limitations.  If you are contacted by a collector seeking to get payment on an old debt, take steps to determine whether or not you are actually liable for the debt in question. Insist on seeing proof of the debt and get a detailed explanation regarding the circumstances of the debt before admitting liability and/or discussing possible payment options.

Educate yourself

The U.S. Government has enacted laws to protect consumer rights concerning purchases and debt collection.  Because of the things that you might be told during collection attempts, it is vital for you to educate yourself about the laws that exist and how they apply to your situation.  Specifically, the Fair Credit Reporting Act and the Fair Debt Collections Practices Act address the details that you will need to know.

Assert rights

Dealing with potentially delinquent debt and people that are hoping to turn a profit by getting it paid to them can be tricky.  From the first contact you receive, your best chance to resolve the issue satisfactorily is to assert your rights.  No one else in the process is going to!  Understand that these collectors will use whatever means are necessary - rudeness, intimidation, harassment - to get whatever money they can.  Depending on the state, the statute of limitations can be restarted with very simple actions on your part (a verbal admission of the debt and/or a payment, even a small one, toward the balance owed).  This is where you need to stop answering the phone and insist that all communication be made in writing.  It gives you a paper trail and it forces the collectors to deal “above board”.

Diligently track future finances

Some “junk debt” may appear after you think it has been cleared up.  It can show up as re-aged debt on a credit report or the collectors can drag their feet on getting the paid debt “documented” appropriately.  Again, by having all information and transactions recorded in writing, you will have the information needed to track your finances going forward.   All documentation related to any zombie and/or forgiven debt should be kept indefinitely.

Just because you have owed money in the past doesn’t mean that debt has to haunt you from now on.  If you legitimately owe the debt, do what you need to do fulfill your payment obligation.  If the debt isn’t yours to start with or it was forgiven sometime in the past, these steps will you make sure it stays dead from now on!