You may have to kill old debts that resurrect and come back to life. Zombie debt may include past debts that you owe, charged-off debt, debt included in bankruptcy, debt you may have never owed and even debts incurred due to identity theft. Zombie debt involves collection agencies purchasing debts for pennies on the dollar that original creditors have written off as bad debt and often times the statute of limitations has already run.
Debt buying has emerged into a multi-billion dollar industry in the past several years and from the looks of it, the industry will only continue to expand. Junk debt buyers can be small businesses to large, publicly traded Wall street companies and the characters involved in this lucrative business are banking on the consumer not knowing their rights. If you are contacted about an old debt or debt you are unaware of here are a few things you can do:
1. Do not acknowledge you owe the debt. Simply acknowledging the debt or agreeing to pay a portion of the debt can ruin your credit. Negative marks can stay on your credit for up to 7 years. By paying a portion of that debt you restart the 7 year clock. If you are nearing the 7 year mark it may be best to do nothing at all. Let it drop from your credit reports.
2. Ignore the phone calls completely. Talking to them may open up a can of worms. Speaking with debt collectors may end up restarting or extending the statute of limitations on the debt in addition to restarting the time period a negative mark can stay on your credit. Remember, if the statute of limitations has run on a debt you cannot be sued for that debt.
3. Stop the calls. If the telephone calls continue, immediately write a letter, certified, return receipt, demanding the collection agency cease all telephonic contact with you. Make sure you clearly state in the letter that you do not agree you owe the debt nor are you acknowledging you owe the debt. Federal law dictates collection agencies must comply when you request they do not contact you via telephone.
4. Check your credit reports. Collection agencies will often stoop to low, illegal tactics to try to get you to pay a debt. Watch out for re-aging of the old debt on your credit reports. The collection agencies will report the old debt to the credit bureaus as a new debt and try to extend the seven-year reporting limit on negative items. Remember, negative items such as late payments and charge-offs can only be reported on your credit report for 7 years. Bankruptcies can be reported for 10 years unpaid tax liens can stay up to 15 years.
5. Debt Validation. Request the collection agency validate the debt. Debt validation forces the debt collector to produce a copy of the original signed contract such as the credit card agreement and the account history of the debt. They cannot simply produce some printed copy of their bill or invoice, it must be from the original creditor. Also, request proof they are licensed in your State to perform debt collection. If the collection agency cannot produce proof you owe the debt, they are violating the Fair Debt Collection Practices Act and can be sued. And, any negative entry they reported to the credit bureaus regarding this debt must be removed from your credit reports.
6. Negotiate cautiously. If you want to pay the debt, be very careful in your negotiations and get everything in writing. Remember the collection agencies purchased the debt for pennies on the dollar so anything you offer over that amount is all profit. You want to proceed with negation with intense caution because collection agencies are tricky. Debt collectors may settle for a smaller amount then turn around and sell the remaining debt to another collection agency or even worse, the collection agency could report the remainder of the debt to the IRS as "income".
7. False promises by the collection agency. Not surprisingly, some debt collectors use dirty, underhanded tactics to collect debt. Many simply lie to the consumer and promise to remove negative credit entries in exchange for payment. Know your rights and get everything in writing. Always negotiate a full deletion of any and all negative entries reported on your credit report of this debt. Cover your bases and make sure the debt collector is not going to sell the unpaid portion of the debt to another company. To learn more about settling old debts for pennies on the dollar visit: Debt Settlement
Lisa Phillips is a marketing consultant specializing in business expansion and development. Because many small business owners lack the personal and business credit necessary to grow and expand, she has developed a free website to aid consumers as well as entrepreneurs in rebuilding and taking control of their credit. http://www.rebuildcreditscores.com
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