"Zombie Debt" is a term that people in my business use for debt that is not legally enforceable. The debt generally has been either paid, settled, or discharged in a bankruptcy.
So how does it happen?
There an industry of debt buyers who buy debt -- both good and bad -- and try to collect it. The debt buyers usually purchase the debt at a discount. Because the debt was purchased at a discount, the debt buyer does not need to collect on 100% of the debt to turn a profit. The debt buyers then use the usual ways to try to collect the debt. They report it to credit agencies, they bring lawsuits, they make telephone calls, etc. Often times, consumers will simply pay the debt or settle it rather than fight.
To be clear, trying to enforce zombie debt is illegal. In addition to the obvious violations of state law, attempts to collect debt that has been discharged in bankruptcy violate the discharge injunction in the U.S. Bankruptcy Code. Reporting zombie debt also often violates the Fair Credit Reporting Act.
How should you handle this? Find a lawyer who handles consumer law who can help.
When one of my clients receives a discharge in bankruptcy, we check the credit report shortly thereafter to make sure that all the debts are listed as discharged in bankruptcy. If any are not, we demand that the creditor make the correction. We check the credit report again, and when debt appears, we bring an action against the creditor for the discharge violation. I handle these matters on a contingency basis. We can use similar techniques against creditors trying to enforce debt that has been settled or paid.
If you think that you might be affected by zombie debt and live in North Jersey or Central Jersey, feel free to contact me even if I did not handle your bankruptcy or the initial settling of the debt. If you live in another area, you might want to start with the alumni list of Max Gardner's Bankruptcy Boot Camp to find an attorney to represent you. And if you want to read more about zombie debt, there are more articles here, here, here and here.
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thanks for sharing "Zombie Debt" information. I always had a confusion in understanding this term, but going through your blog made it simple for me to understand. Thanks again!
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Jonshan
Law
Debt has been so helpful for me in order to start investing. Recently, bankcruptcy has become a hot issue among companies and some individual. One of the good alternatives for this problem is debt settlement solution. A lawyer from debt settlement agency will help you to negotiate with your creditor. I agree to your point that we should find a good lawyer for our security.
ReplyDeleteModern debt higher than ever, with an increase in bad loans and credit card debt comes a corresponding rise in debt coma. Many consumers find themselves hounded by debt collectors on old debt that they thought long gone.
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How to reverse boycott debt collectors.
ReplyDeleteWhen a debt collector/debt collection/debt buyer company can repeatedly call with the intent of getting money their customers can repeatedly answer or call back with the intent of not giving them any. They need people to pay with as little talk as possible. They don't want to talk with people who know they are never going to pay. Be all talk and no pay. Answer when convenient. Call back. Give no information. Verify nothing. Ask as many questions as you can. Answer none.
Don't ignore/block/report them. It doesn't work. These folks want you to ignore them for as long as you can stand to or until you give them something valuable like money or information. Ignoring them is being their good customer. Sending a cease and desist is giving information. It lets them know you are still alive and remain their good customer. Preparing to initiate unlikely individual legal battles is being their good customer.
Be their bad customer. Make them talk to you fruitlessly for as long as they can stand to or until they stop selecting you as their customer. These companies cannot spend seconds much less minutes on the phone with every person who will never send them a dime. But they don't know who that is. You do. That knowledge is power. Every second you can keep their staff on the phone will render their business less profitable giving them a reason to never call you again.
Calling will not reset your SOL. Making a partial payment will.
One person who does this likes to ask general questions they should but usually won't answer, "May I have the name and address of your agent for service of process?" Calmly and slowly ask them to spell every word in the address. Read it back for verification. Control the pace. If they are rushing then politely ask them to slowly repeat. "Are you a corporation and if so in which state are you incorporated?" Repeat your questions when you don't get direct answers. When they won't answer a question ask, "Would you like to comply with the business and professions codes of your state?" That is usually the point when they hang up on me but if they say they want to comply then begin your questions again.
Repeat while you have the spare time. These folks have many victims and few operators. If everyone calls back but pays nothing the mass auto-dialer business model becomes unprofitable. Don't aid and comfort the enemy by ignoring them. Call! Have a nice long slow friendly chat! Make them hang up first.
Press 2 for Spanish.
There are certainly enough victims to take down debt collectors so ignoring/blocking seems downright Orwellian. Really? We're just going to passively submit and go with a block list or however we manage ignoring an endless stream of unwanted phone calls day after day? No! Unite or remain conquered. Answer/return every call - become well practiced at keeping these folks on the phone - or count yourself not amongst the free.