12/26/2012 10:30 PM ET|
7 steps to avoiding zombie debt
If a debt you thought you'd buried long ago rises again to threaten you, here are the actions you should take to protect yourself.
It could come by letter or phone, or even a notice to appear in court: Zombie debt -- old debt that refuses to die -- is chasing you.
Undead debts have become a consumer epidemic. If you get a letter or phone call, or even get sued, over an old debt, here's what you should do, according to consumer advocates:
No. 1: Learn your rights. The first thing consumers should do when old debts comes back to haunt them is to learn their rights, experts say. Start by visiting the Federal Trade Commission's guide to old debt and consumer rights. Then look up your state's statute of limitations on debt, which can range from two to 15 years, according to the FTC. If the statute of limitations has passed, the debt collector cannot successfully sue you if you can prove the debt is too old. Morally, you may still owe the debt, but legally, the creditor's ability to collect has expired.
No. 2: Proceed with caution. "Be very, very careful," says Ira Rheingold, the executive director of the National Association of Consumer Advocates. Certain actions you might take, such as making a small payment on a debt or even promising to pay, can "re-age" a debt on which the state statute of limitations has passed. Such actions can reset the clock, allowing the debt collector to sue you.
No. 3: Investigate the debt. When you are contacted about an old debt, there's a good chance you might not recognize it because so many years have passed. For example, you might get a call from ABC Collections, which cites AT&T as the original creditor, says Bob Hobbs, the deputy director of the National Consumer Law Center. "But what if you had five different accounts with AT&T over the years, and do you have your old phone records?" You could also have had an AT&T credit card, he adds. "That's one of the things about zombie debt -- it's hard to know what they're talking about." In other situations, the debt might not even be yours, experts say.
No. 4: Check the amount. "You may owe something on a debt, but when the debt buyer gets to it, there are so many added fees, it might be hard to figure out how much you actually owe," Rheingold says. He notes that it wouldn't be unusual for a consumer who remembers owing $200, for example, to get hit with a notice claiming he owes $1,500 or more.
No. 5: Ask for verification and documentation. Experts recommend that you write to the debt collector to ask for documentation of the debt. You should request the original contract, as well as the date and details of the last payment, Hobbs recommends. He says you also should ask for proof that the company owns the debt. "You want to make sure you are not dealing with a fraudulent debt buyer."
No. 6: If you decide to pay, make an offer. If the debt is yours, the amount is correct and you've verified that the debt buyer owns it, you can offer to settle, Hobbs says. For example, if you owe $500, you could call and offer to settle for $250 or less. "Most debt buyers would love to get a 50% lump-sum payment, and they might accept 30% or 40%," Hobbs says.
No. 7: If necessary, get a lawyer. If you are having trouble sorting out the situation or if you get sued, experts suggest consulting a consumer attorney who handles debt collection cases. To find one, check the National Association of Consumer Advocates' website, Hobbs recommends. A lawyer can defend you and help determine whether the company may have violated the Fair Debt Collection Practices Act or other laws while trying to collect the debt, Rheingold says.
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You are a knucklehead. Creditors have become legal loan sharks by bribing our lawmakers in congress to allow usuary to be legal at 30+% rates! Historically usuary is the most dangerous banking practice because it inevitabley causes default! Now, the banks even get a write-off of the loss as a tax break which every tax payer subsidizes, and can still sell the debt. A debtor still has to pay tax on a forgiven debt as income. Zombies buy debt for pennies on the dollar and can try to collect the full face value plus an inflated interest. There is a nasty double jeopardy in this. The founding fathers put bankruptcy rules in the bill of rights to give people a second chance. And to discourage banking practices [usuary] which would cause such. You need to read "The Federalist Papers". E. Salesky PhD
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