Dealing with zombie debt can be a financial nightmare. These are old debts that you thought were long gone, but they’ve come back to haunt you.
What Is Zombie Debt?
Zombie debt refers to old, often past the statute of limitations, or already paid-off debts that are still pursued by collection agencies. It can be frustrating and challenging to handle. Here are steps to help you “kill” this zombie debt:
- Verify the Debt: The first step is to ensure that the debt is indeed legitimate. Request written verification from the collection agency, including details of the debt, the original creditor, and the amount owed. This is your right under the Fair Debt Collection Practices Act (FDCPA).
- Check the Statute of Limitations: Every state has a statute of limitations for debt collection. Once this period expires, the debt becomes uncollectible in court. Research your state’s statute of limitations for the type of debt you’re dealing with.
- Dispute the Debt: If you believe the debt is invalid or inaccurate, dispute it in writing to the collection agency. They must investigate and provide evidence of the debt’s validity.
- Cease Communication: You can request that the collection agency cease contacting you regarding the debt. Send a cease and desist letter by certified mail with return receipt requested. They can only contact you one more time to acknowledge your request or inform you of legal actions.
- Negotiate a Settlement: If the debt is valid and within the statute of limitations, you may consider negotiating a settlement. Offer to pay a reduced amount in exchange for them marking the debt as “paid” or “settled” on your credit report. Always get any agreement in writing before making a payment.
- Review Your Credit Report: Monitor your credit report to ensure the debt is reported accurately. Dispute any discrepancies with the credit bureaus.
- Seek Legal Advice: If the collection agency is harassing you, violating your rights under the FDCPA, or you’re unsure how to proceed, consult with an attorney who specializes in debt collection issues.
- Educate Yourself: Familiarize yourself with your rights and the laws related to debt collection in your jurisdiction. Knowing your rights can empower you in dealing with collection agencies.
- Maintain Documentation: Keep detailed records of all communication with the collection agency, including letters, emails, and phone calls. This documentation can be valuable if you need to prove your case in the future.
- Consider Bankruptcy as a Last Resort: If you have substantial debts that you cannot manage, consult with a bankruptcy attorney to explore whether bankruptcy might be a viable option to eliminate or restructure your debts.
Remember that dealing with zombie debt can be complex, so it’s crucial to proceed carefully and, if necessary, seek legal advice to protect your rights and financial well-being.
Dealing with Zombie Debt Reassignment
I had a third-party collector trying to collect on a debt, but the dates and amounts were wrong. So, I disputed it and it was deleted in November (Debt Recovery Solutions). Now it’s back on my credit report in December by another third-party debt collector (Commonwealth Financial). Exactly the same amount—states open and three months past due. The debt is from 2017. And it’s the wrong amount. I still have my last medical bill. Is there anything I can do?
—Kelly B. in Pennsylvania
Amy Myers from Ovation Credit Services responds…
It sounds like there are a few different issues at play here. The first is whether debt can reappear on your credit report after it has been deleted, and the second, which is entirely separate, is how you should handle inaccurate information on your report.
Unfortunately, this situation is all too common. A study from the Federal Trade Commission found that about 20% of consumers have an error on at least one of their three credit reports. These errors can harm your credit score and cost you money, but it’s a good sign that you are committed to improving your credit.
How deleted items can reappear on your credit report
Unfortunately, deleted items can reappear on your credit report if the credit bureau has a reason to believe it’s a legitimate debt. This is a practice known as reinsertion and is laid out in the Fair Credit Reporting Act.
First, let’s quickly talk about how the dispute process works. When you dispute an item in your credit report as being inaccurate, the credit bureau will investigate your claim. If the collections fail to verify the debt, the item is removed from your credit report.
But just because it was removed doesn’t mean it can’t reappear. If the debt collection agency can verify the debt, it may be reinserted on your credit report. In this case, the reporting agency is required to notify you within five business days.
The other question at play here is why debt would have reappeared on your credit report by another debt collector. Debt collectors can sell debts to other agencies in the same way that lenders can sell debts to collectors. For that reason, it’s entirely possible that your original collector sold the debt to another company, who then reported it to the credit bureaus.
Debt reassignment can raise legal questions about the validity of the debt and the rights of the debtor. Understanding the legal aspects is crucial in dealing with zombie debt reassignment. When a debt is sold to another debt collector, your rights as the consumer don’t change, but neither does your responsibility for the debt.
Impact on Credit Score
Zombie debt reassignment can have a negative impact on your credit score. Even though the debt may be old, it can still appear on your credit report and affect your financial standing.
How to remove incorrect information from your credit report
It’s possible that a debt could be sold to another collector and reappear on your credit report after being deleted. However, given that the date and amount on the report are incorrect, you have the right to dispute it. Creditors have a duty to report accurate information to credit bureaus. If they fail to do so, you may have it removed.
To dispute an inaccurate item, start by pulling a copy of your credit report from each of the three credit bureaus: Equifax, Experian, and TransUnion, or set up a free credit consultation. Federal law requires that each person be able to access their credit report annually from each credit bureau. During the pandemic, each consumer is allowed free weekly reports.
The next step is to dispute the debt, which you can do through the credit bureau’s websites or by contacting them directly via mail or phone. You’ll provide your personal information and explain which information is incorrect. The bureaus have 30 days to investigate your claim, which includes reaching out to the creditor for verification of the debt.
If the creditor can’t verify the date and amount of the debt, then it will be removed from your credit report. Based on the information you’ve provided and the fact that the debt was previously deleted, it sounds like that might be the outcome.
If the credit bureaus don’t remove the claim, you’ll have to work directly with the debt collector. Ask for a debt validation letter, which lays out the debt, the amount due, and the date. They’re legally required to provide this letter. You can work directly with them to either have the debt corrected on your credit report or removed altogether.