Ask Stacy: Zombie Debt Haunts Consumer

Today we have a question about a scary consumer topic: zombie debt.

I have absolutely got to get this question answered SOON! No idea where to turn, watch your news segment nightly have never seen this answered: can old (paid off actually but still apparently lurking out there) “ZOMBIE DEBT” be loaded by the zombie-debt collection people on a consumer’s new credit card? HERE’S WHY I ASK. After years of going without any credit cards having paid all off 11 years ago, I now HAVE TO GET A CREDIT CARD my employer requires it for business travel – I have to charge hotel/car rental and await reimbursement(and hotels/car rental agencies DO NOT accept debit cards, well some hotels will accept debit for room reservations but when you get there you HAVE TO give them a credit card “in case” you “damage” their room, that’s how it was explained to me – NO debit card accepted). BUT I still occasionally get come-ons on this old paid off zombie debt and am terrified they will find out I have a new credit card and promptly load it on the new account. Is this still allowed under new law? What do you do if it happens??? I have a new job, I sure can’t afford a lawyer that charges ten times an hour what I earn an hour!
– Sarahkate

Here’s your answer, Sarahkate:

No, a collection agency can’t put old debt on a new credit card under any law, old or new. As for what you call “zombie debt”: I don’t believe in ghosts.

If a collection agency is contacting you about a debt, step one is to ask them to provide written proof that you owe it. If they can’t, you’re off the hook. If you’ve paid the debt, provide whatever proof you can that it’s satisfied and their collection efforts are in error.

If you haven’t paid the debt, step two is to check your state’s statute of limitation laws. A debt is only legally collectible for a specified period of time – for example, credit card debt is not collectible after as little as three years in some states and for as long as 15 in others. Also note that if you make even one small payment, you can start the clock ticking again – that’s one reason why you really need to be careful when dealing with collection agencies. Here’s a list of state statue of limitations from about.com.

Step three: If you legitimately owe the debt that falls within the statute of limitations, deal with it. At least talk to a lawyer: Normally, the first consultation is free. It’s important not to ignore it, because this is a situation where “zombie” debt can rise from the dead and kill both your credit and peace of mind.

Worst-case scenario? If the debt is large enough to justify legal action by the collection agency, they could go to court, get a judgment against you, and start looking for assets to seize or wages to garnish. And as you are probably already aware, unpaid debts aren’t a great thing to have reflected in your credit history.

Don’t think expert legal assistance is beyond your reach: It could be free. If a debt collector breaks the rules when attempting to collect a debt (and many routinely do), they’re liable for damages, including your attorney’s fees. See our story Abused by a Debt Collector? Get a Free Lawyer. And even if the debt is valid and it needs to be repaid, a good lawyer might be able to help you negotiate a low settlement, as well as one that doesn’t hurt your credit history.

Bottom line? If you’re haunted by any kind of debt – zombie or otherwise – deal with it. We’re blessed with strong consumer protection laws in this country, but they can’t help you if you don’t use them, or talk to someone that will.

Got more money questions? Browse lots more Ask Stacy answers here.