Zombie Debt Can Track You Down
NEW YORK ( MainStreet) Maybe it is an old department store charge. Perhaps a doctor's bill. Whatever it is, it's money you owed maybe five or ten years ago, you lost track of it, but now the phone is insistently ringing and a bill collector is on the line.
Someone wants your money. Now.
You do not even know who's calling, because, almost always, the collector works at an independent firm that bought the debt. In fact that debt may have traded three, five or more times as it aged. Each buyer pays a little less until, finally, the debt is selling for pennies on the dollar.
A $1,000 store charge that is ten years old might go for $10.
Welcome to the world of Zombie debt.
There are two reasons the debt is so cheap. The first is that the older the debt - the longer the debtor has ignored it - the lower the probability it will be collected.
The second, bigger reason for steep discounts: every state has a statute of limitations for legal action to collect a debt. The time varies by state and the type of debt but what it means is that, eventually, a moment comes when the collector cannot pursue legal action to attempt to collect a debt.
Note: the statute of limitations does not mean a collector cannot attempt to collect a debt. It simply means that, ordinarily, the collector cannot sue or threaten to sue.
But this also means there are what some call Dracula collectors who pursue Zombie debt with a blood lust. Are their tactics always within the law? They are not, said multiple lawyers, but the debtors don't always know their rights.
Mainline debt collectors - working for the big financial institutions that advertise on network TV - generally play by the rules, Not so the Dracula collectors, said Florida lawyer Mark Hankins, author of Debt Hope: Down and Dirty Survival Strategies (Bookshaker, 2011).
Federal law demand civility and honesty on the part of collectors, but that is lost on many Dracula collectors who may lie to, insult, abuse and harass debtors, said sources.
What can a debtor do?
First off: know when a debt is in fact a Zombie. In California that is a debt involving a written contract (including credit cards) that has been ignored for four years - the debtor has not paid a dime on it and has not acknowledged or affirmed it in any way.
In the District of Columbia the statute kicks in at three years.
In New York it is six.
Different states also vary in how scrupulously they count the time leading up to the statute of limitations, said Hankins. You may believe a debt has timed out but if the judge disagrees, good luck.