With Halloween upon us, it seems like the perfect time to share highlights on a concerning trend in collection attempts, known as zombie debt, a debt raised from the dead, so to speak. It could be old debt, but it also could be something you never owed at all.
When a person doesn’t pay a debt, the lender will take action — by phone, letter or even a court case — to collect the money owed. In some cases, though, the debtor simply can’t pay or can’t be found. In other cases, the debtor files for bankruptcy and, depending on the kind of debt owed, the debt may be put on hold, renegotiated or discharged completely. Sometimes, this old debt unexpectedly comes back to life.
Some of the most common scenarios involving zombie debt include: unpaid debts beyond the statute of limitations when you can be taken to court for payment, unpaid debts you owe but forgot about, unpaid debts wiped out with bankruptcy and debts you already settled with the creditor.
Other scenarios include fraudulent charges made by another party through identity theft, or fraud involving an impostor with false claims of a fake debt to lure you into a financial scam.
How does debt come back to life? Creditors often remove old debt from their ledgers and sell it to third-party collectors. In some cases, the debts are legitimate, but in other cases, they aren’t. When debts are sold and re-sold, the records may be incomplete or inaccurate. Think of it as a game of telephone. The more times a debt is passed around, the more chance that the related information is wrong.
The legal treatment of old debt will depend on where you live and the type of debt in question. Depending on your state’s law, debt collectors are typically not allowed to sue for old debt if the statute of limitations has expired. However, they are still allowed to contact you and ask to pay off the old debt.
In general, Georgia uses a four-year statute of limitation for verbal debt and six years for written, promissory or open debt agreements. Tennessee uses a six-year statute of limitation in all of these types of debt.
Keep in mind, if you start to make payments or acknowledge the debt in some way, the action may restore the collection agency’s legal right to take the matter to court. Never immediately agree to make a payment on a debt you aren’t sure about, even if the collection agency puts pressure on you for payment.
Instead, it’s best to approach the debt claim by doing a thorough investigation. If possible, search through old records to find bank statements and notices of payment. Check with your financial institution to see if they can assist. Gather as many facts as possible about the debt in question.
Next, within 35 days of initial contact and without acknowledging the debt is yours, ask the creditor for a debt validation letter. The Fair Debt Collection Practices Act requires the debt collection agency to provide you with written proof of the debt’s validity or a judgment against you, as well as the name and address of the original creditor if the debt was resold. If this information is provided, determine if the debt is really yours and if it still needs to be paid.
Your next steps vary, depending on your findings.
— If you determine the debt was yours, but you already paid it, write a letter to the collections agency and demand that they cease contact. Include proof of payment if available. The collections agency is legally required to stop contacting you under the Fair Debt Collection Practices Act.
— If you determine the debt is not yours or is invalid, write a letter challenging its validity and where applicable, include any proof you may have.
— If you determine you do owe the funds and you can pay the debt, resolve the issue by first getting a payment agreement in writing and then eliminating your unresolved debt.
— If you determine you do owe the funds, but you can’t pay the debt, you’re encouraged to pursue debt relief through credit counseling.
When deciding what route to take, keep in mind that once a debt is past the statute of limitations, collectors can no longer sue you to get payment. In addition, the Fair Debt Collection Practices Act stipulates that any unpaid debts should be removed from a person’s credit score after seven years. If you decide to begin paying or pay in full an old debt, it could restart the statute of limitations and affect your credit.
If you need to contact a collection agency to dispute a debt, request a debt validation letter or ask the collection agency to cease contact, there’s letter templates available from the Consumer Financial Protection Bureau to assist you at consumer.gov.
Remember while most debt collection agencies are legitimate, there may be times when a scammer is phishing for information. For more information on how to avoid this scheme, visit BBB.org/AvoidScams. If you’ve been targeted by a debt collection scam, be sure to report it to BBB.org/ScamTracker.
Festive Forest
In other news, Festive Forest is coming to our community. We hope you’ll mark your calendars for BBB’s new event, which is being held in partnership with EPB and the city of Chattanooga Parks & Outdoors department. The Festive Forest will go live at 5 p.m. Nov. 22 in Miller Park to coincide with EPB’s unveiling of their annual holiday window displays.
Miller Park will be decorated and lit with 50 Frazier firs sponsored and decked out by local and trustworthy businesses, charities and organizations to help us celebrate the holidays while shining a light on trust in our community. The trees will remain lit until Jan. 1 for everyone to enjoy throughout the holidays.
There are a few trees remaining for sponsorship. If you’re interested in highlighting your business, organization or are an individual/family who would like to honor someone, email tngabbb@chattanooga.bbb.org or call us at 423-266-6144 for more information.
Michele Mason is president of the Better Business Bureau for Southeast Tennessee and Northwest Georgia.