Zombie Debt - What You Need to Know About Old, Expired Debt Before It Comes Back to Life to Haunt You
73Zombie Debt
How Zombie Debt Comes Back to Life
There are a few ways to re-animate zombie debt, but the primary way it's done is when a consumer acknowledges the old debt as his or hers and makes payment on the debt .. even one small payment, re-ages it (by restarting the statute of limitations) and brings it back to life. Another method involves the owner of the zombie debt filing a lawsuit against the debtor and winning a default judgement (because of failure to respond in a timely manner) that can be used to garnish wages.
But debt collection credit cards have added a new twist to the zombie debt game. As mentioned in the previous section, debt collectors partner with banks to offer and issue new credit cards to consumers who owe old credit card debt that's outside of the SOL. To receive the new credit card, the borrower agrees to pay back the old expired debt which gets rolled into the balance of the new credit card.
It's a win-win for the banks and the collection agencies, but what about the consumer?
Zombie debt has nothing to do with car loans, credit cards, mortgages or student loans issued to those ghoulish creatures from Zombieland and the Walking Dead who constantly hunger for human flesh. But it has everything to do with something much scarier ... fiendish debt collectors trying to bring old, expired consumer debt back to life to suck money from your wallet.
What is zombie debt?
Zombie debt is very old consumer debt where the statute of limitations on the debt has expired. Old credit card balances are a very popular form of zombie debt. These old balances are purchased from credit card issuers by debt collection companies. Debt collectors buy this old debt for one reason: to make money. Smart collection firms buy this type of debt for pennies on the dollar and look to make money by: (1) calling & dunning debtors to make payments on the old debt; (2) bringing lawsuits to win easy judgements; (3) using the credit system to squeeze cash from debtors; (4) partnering with banks to issue debt collection credit cards; and (5) if all else fails, re-sell the old debt to another zombie debt buyer.
Now that we know what zombie debt is, why debt collectors buy it and how they make money from it, let's look at how these debt buyers resurrect old expired consumer debt.
How to Protect Yourself Against Zombie Debt
- Know your rights under the FDCPA (Fair Debt Collection Practices Act) and FCRA (Fair Credit Reporting Act);
- Know what the Statute of Limitations on debt is in your state;
- Make the debt collector verify the debt in writing;
- Monitor your credit report at least once a year to make sure the collection agency doesn't report the zombie debt to a credit reporting agency as a trade line;
- Limit your communication with the collection agency; only in writing by certified mail return receipt - no verbal communication by phone.
But the smartest thing you can do to protect yourself against zombie debt coming back to life to haunt you is to never acknowledge the debt as yours.
Debt Collection Credit Cards - What's the Benefit to the Cardholder?
For people with serious credit challenges, these cards present an opportunity for a fresh start when other issuers are not willing to take the risk. But for others the benefit is questionable. Because many people accepting these offers are unaware that they have no legal obligation to make any payments on the expired credit card balance. And the banks issuing these credit cards may not be making that fact clear to consumers. In fact, some issuers have run into trouble with the FTC for being deceptive about the old debt being outside of the respective state's SOL.
If you're concerned about zombie debt coming back from the dead and wreaking havoc in your financial life, follow the tips mentioned in this article - particularly familiarizing yourself with the statute of limitations on debt in your state, knowing your rights under the FDCPA & FCRA and document everything.
SOL On Credit Card Debt for All 50 States
- Statutes of limitation for credit card debt collection, all 50 states
Creditors have a limited time in which to file suit over unpaid credit card debt. Here are the statutes of limitation for all 50 states and Washington, D.C.
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