Zombie debt. It’s a witty description of a modern annoyance. Though you may enjoy hearing about a new zombie show on TV, you’re not going to enjoy hearing you have zombie debt.
Zombie debt is debt that was once written off by a company either because you were never able to pay, or the company was never able to make contact with you. Time went by, and the company eventually sold the debt to a third-party debt collector, who then started to make efforts to collect upon the money you owed.
Once buried, but now back from the dead, zombie debt can really throw a wrench in your monthly finances and disturb your evening serenity.
How Much Do Debt Collection Companies Pay for Your Debt?
Believe it or not, the norm is very low, with an industry standard of only 3%. So say you owed a company $3,000, the debt collection company probably only paid about $90 for your debt. Even if they are only able to recoup 10% of the original debt, that’s still a 7% return for very little effort on their part.
Keep this in mind.
How Old Is Your Debt?
It’s likely you don’t even remember where the debt came from, and if it’s really old, it probably doesn’t even show up on your credit report anymore. Luckily, there’s a thing called statute of limitations.
Most states have a statute of limitations of six years. Once the debt is six years old, the debtor is no longer required to pay it. The debt is still allowed to exist, but the debtor, after six years, is no longer legally required to pay upon it.
Should You Just Pay it?
Is it older than six years? If so, there is no situation where it is to your benefit to pay anything. Sure, you’ll stop getting phone calls faster, but that’s about the only perk.
What You Should Know About the Statute of Limitations and Credit Scores
Don’t take them up on any offer to settle the debt for a lesser amount. Unless you receive something in writing, once you send them a portion of the debt, the whole amount is then reanimated and the statute of limitations restarts.
Once this happens, the collection agency has every right to legally pursue you. Furthermore, the debt will reappear on your credit report.
Should you decide to the pay off the full amount, your credit score will only be hurt because you will then have late payments and bad debt added to your credit report. It’s important to dispute any errors listed on your report.
What You Need to Know About Your Rights
The Consumer Financial Protection Bureau (CFPB) has a handy website to get you up to speed on your rights as a debtor.
We recommend you read it through to assuage any of your fears. What you want to focus on is the Fair Debt Collection Practices Act (FDCPA). It boils down to the following points:
- Debts older than six years cannot be taken to court
- Debts older than seven years must be removed from your credit report
- Debt collectors cannot lie to you about anything
- Debt collectors must stop contacting your work and family after you send them a cease and desist letter
What to Do When You’re Called
Don’t spend any time on the phone with the collection agent explaining anything. Instead, ask them for the name of the company they work for and the company’s address.
Do not acknowledge that the debt is yours — any suggestion that it is can give them legal ammunition to pursue you further.
Next, send a letter disputing that the debt is yours and ask them for proof that it is. The letter must be certified and must be sent within 35 days of the initial contact. After you’ve sent your letter, do not speak to them until you receive written proof that the debt is yours.
Once you have received the information, you will be able to determine if your debt is within the statute of limitations.
Contact Us for Help
If you’re still not sure about your rights and are worried about zombie debt coming back to hurt you, feel free to contact us at Ovation Credit for a free consultation on credit repair.
We specialize in helping people repair their credit and are well prepared to help you escape zombie debt once and for all.