Surviving the Zombie Apocalypse: Bills Coming Back to Life
Have you ever wondered whether or not Zombies really exist? Guess no more. They are real, and they can haunt you for years! They can look innocent enough, arriving in your mailbox in a simple envelope. Proceed with caution! Inside that envelope is a letter from a bill collector for a debt you thought was long dead. However, that debt just came back to life! You have entered the Walking Debt Zone, and you are staring face-to-face with a ZOMBIE DEBT! What will you do? What can you do!
First, what is a Zombie Debt? Many years ago, bill collectors would eventually give up on relatively small, delinquent debts. They could go to court and seek a judgment, allowing them to garnish wages or levy liens. However, if the debt was only a few hundred dollars, the bill collector had to consider the possibility they may spend several hundred dollars chasing after that debt. Then, if the borrower didn’t have income, a bank account, or property, there might not be anything to garnish or levy, so the bill collector would give up.
Then, in the late 1980’s, a US government owned company started selling batches of delinquent credit card debt to 3rd party collection companies to help pay for the savings and loan crisis. The 3rd party collectors could collect the full debt and make a handsome profit. The Zombie Debt industry was born. Since then, it has grown into a multi-BILLION dollar business. Now, Zombie debt collectors routinely buy (for pennies on the dollar) old, unsecured credit card debt, unpaid gym memberships, cell phone contract balances, and more.
First, it’s important to know there is a key date, the “date of last activity”. The date of last activity is just that, the last time a payment or a purchase transaction occurred on the debt. The debt may still be legitimate. However, do you have to pay it? Should you pay it? What are your rights?
In Oklahoma, there is a statue of limitations on collectability for old debts. It’s five years. That means the clock starts ticking from the date of last activity. AFTER five years of no activity, the bill collector loses their right to sue, meaning they can NOT garnish wages, seek a levy or take any other legal action, despite what they might tell you. Then, seven years from the date of last activity, most debts – with a few exceptions like criminal restitution – drop off your credit report.
Regardless of the date of last activity, the bill collector can not have you thrown in jail. Debtor’s prisons are so 19th century – Britain and the US ended debtor’s prisons, for the most part, by the end of the 1800’s. However, it should be noted, you can go to jail for not paying back child support.
Jail may not be in your future, but until the debt drops off your credit report, it can wreak havoc on your credit score, making it more difficult and more expensive to borrow money in the future, among other things. Once the debt passes the statue of limitations and drops off your credit report, you may think it’s nothing more than a memory.
Or so one thinks: Eight or ten, or even fifteen years later, the debt can rise from the dead. A Zombie debt collector may purchases your old debt then tries every trick in the book to reactivate that debt so they can collect the full balance. They may entice you by saying things like, “as a way to show our appreciation, we will send you a free calendar if you make just a small payment on your old debt.” Bazinga! Send the money and you’ve just opened the door for the Zombie debt collector to walk right in and reactivate that debt. That old debt has just been given new life, and worse, a NEW date of last activity!
What are My Rights?
- Morally, you may still owe the debt. However, the creditor’s rights to collect have expired. If all the deadlines discussed above have passed, you will not face any adverse consequences if you ignore it and refuse to pay. If you feel a moral obligation to repay the debt, then you can make the decision on your own whether or not and how to repay the debt.
- If you promise to pay or send in a payment, the debt could “re-age” and you could risk renewing the collectors’ rights. If you want to keep the debt dead, say: “I do not acknowledge the debt,” and ask that they cease contact with you.
- If you decide to pay – you can offer less than you owe. You can offer a settlement of less than half of what you owe. Be careful though, get any settlement agreement in writing before you pay, and force them to provide proof that they do in fact own the original debt.
- Who do I call if I think I am a Victim of Fraud? If you are being harassed, by being called repeatedly, or if they contact you at work after you have sent them a cease and desist letter, or the Zombie debt is appearing on your credit report, you need help:
- The Federal Trade Commission has this to say about “Time Barred Debts”: http://www.consumer.ftc.gov/articles/0117-time-barred-debts
- You may need a lawyer: http://www.naca.net/find-attorney
- For assistance with reviewing your credit and building an action plan, contact cccsok.org if you are in the central and western Oklahoma area. Outside this region, you can visit nfcc.org to locate a reputable, certified credit counselor in your area.
- Obtaining a credit report: Everyone has the right to a free copy of their credit report once per year from each of the three credit bureaus. To obtain your free copies, visit annualcreditreport.com or call 1-877-322-8228. The three credit bureaus are Equifax, Experian and TransUnion.