Facts You Should Know About Old Debt and Zombie Collections

No matter if you want to clean up your credit report or have an old zombie account coming back from the dead to haunt you, it’s important to understand your rights. Laura answers a question about old debt, explains the statute of limitations, gives advice for dealing with collectors, and offers four ways to handle accounts in collection.

Laura Adams, MBA
9-minute read
Episode #487

How to Stay Safe from Zombie Debt Collectors

We don’t know if the statute of limitations has expired on Kimberley’s debt. But it’s likely that a new collector purchased it for pennies on the dollar and is trying to get some amount from her to make a profit.

To stay safe from potentially harmful zombie debt collectors, you need to be aware of common tactics:

  • Verbally harass you. This is illegal according to the federal Fair Debt Collection Practices Act
  • Misrepresenting their company. Collectors can’t tell you that they are an attorney or a litigation firm when they aren’t. 
  • Threaten a lawsuit. This is illegal if your debt’s statute of limitations is expired, but it can scare people into paying. 
  • Begin a lawsuit. Collectors may try to sue you even when the statute of limitations has expired. If you receive a summons, don’t ignore it because you have a limited amount of time to respond. If you don’t respond in time you may forfeit your right to fight the lawsuit, using the statute of limitations as your defense. 
  • Get you to pay for someone else’s debt. In general, you’re not responsible for debt that’s not in your name. The only exception may be the debt of a deceased spouse if you live in a community property state. If a creditor tricks you into believing that you owe a debt that isn’t yours, making a payment could be construed as an admission that the debt is yours.    
  • Promise to stop contacting you in exchange for a small payment. As I mentioned, that can be a setup to revive your debt and reset the clock on the statute of limitations so they can sue you for the full amount. 
  • Promise to keep the debt off your credit report. As I mentioned, past due debt stays on your credit reports for 7 years, even if you settle or pay it off.

Also see: The Truth About Debt and Death

So, if a collector contacts you by phone, ask for the company name and address and say you will only communicate through the mail, and then hang up. Don’t admit that you owe the debt or engage in conversation or debate about the issue.

Speaking with a collector is risky because you could accidentally say something that gives them a leg up or resets the statute of limitations on your debt. 

Speaking with a collector is risky because you could accidentally say something that gives them a leg up or resets the statute of limitations on your debt. All communication should be done through snail mail so you have hard copies.

You have the right to request verification of the debt by sending a certified letter back to the creditor within 35 days after receiving their first letter. They must prove that you owe the debt and they they’re authorized to collect it.

Quick and dirty tip: Download the Credit Score Survival Kit for a free step-by-step video tutorial on how to check your credit report, correct errors, and raise your credit scores.

4 Ways to Handle Old Debt

As you can see, the law regarding past due accounts is tricky. It’s easy to make a wrong move that could end up hurting your finances. I recommend weighing your options carefully and consulting with an attorney.

If you’re like Kimberley and have an old debt, here are 4 ways to handle it:

1.    Pay off the full amount of debt owed.

Even if the statute of limitations has expired on an old debt, you may still decide to pay the full amount. For many, honoring debt is a moral obligation, even after struggling through a financial hardship.

If the debt hasn’t already fallen off your credit report, paying it changes the account status from “unpaid” to “paid,” which improves your credit.

2.    Begin making payments on your debt.

If your financial situation has improved and you want to start chipping away on an old debt, remember that in some states it could restart a new statute of limitations period, giving you less legal protection.

Again, if it’s still on your credit report, having the account show as “paid” gives your credit a chance to improve.


About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlersbook is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.