Business, Legal & Accounting Glossary
The term used to describe old debts bought to life through the actions of recovering it.
Zombie debt is debt that has been removed from your credit record but is still being pursued for various reasons. Zombie debt is frequently neglected and written off as uncollectible. However, zombie debt can be resurrected from the dead if a debt collector tries to collect on it again, even though the debt is too old to be pursued legally.
Debt that is more than three years old and has either been forgotten about, paid off, or belonged to someone else is referred to as zombie debt. It could also be the consequence of identity theft, a computer malfunction, or a false attempt to collect on an unpaid obligation.
Most likely, the original creditor has given up on the loan and sold it to a debt collection firm. Debt collectors can be dishonest, and they frequently conduct harassing and threatening phone calls.
In most states, the statute of limitations on how long a lender can try to collect on a debt is three to six years, and in certain states, the statute of limitations is much shorter. Even though the debt remains legitimate after the statute of limitations has expired, you are not legally obligated to pay it. Companies that buy uncollectible debts, on the other hand, are playing a numbers game. To be profitable, they only need a few people to return their loans.
Those who are on the receiving end of these attempts must exercise caution. Paying a bill that is past the statute of limits has no value because it will reset the statute of limitations, place the amount back on your credit record, and allow the debt collector to pursue you to court.
The Fair Debt Collection Practices Act gives debtors protection from harassment (FDCPA). This law governs third-party debt collectors’ behaviour and acts, as well as the means and techniques by which they can contact debtors, as well as the time of day and number of times they can contact them.
The most important thing is to avoid talking to the debt collector over the phone. Within 35 days of making contact, ask for their address and send them a certified letter. If you don’t believe you owe the obligation, ask them to prove it to you.
If the debt collection agency continues to approach you, write them another letter informing them that they can only contact you in writing or if they intend to sue you. If the debt is past the statute of limitations, the collector will most likely abandon the case.
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This glossary post was last updated: 6th January, 2022 | 0 Views.