Collection agencies often buy up delinquent loans and unpaid bills from many years ago and then demand payment from the debtors. But the “zombie debts” these collection agencies try to bring back to life often are so old that consumers have little memory of the bills and whether they were paid. The collection agencies also might add steep fees and penalties. Sometimes they target the wrong person, harassing someone who simply shares the real debtor’s name.
If you receive a call from a collection agency about money that it says you owe from years ago…
Request a letter. Say, “Please send me the details about this debt in writing. It is not convenient for me to discuss this right now.” Collection agencies usually phone, but federal law requires that they provide details in writing within five days of your request. They also are barred from calling when it is inconvenient for the debtor, so saying “not convenient” should end the call.
Warning: Even if you know that the debt is yours, do not admit this fact and don’t agree to make even a tiny partial payment. This could reset the clock on statute-of-limitations laws, making it possible for collectors to sue you over this debt (more on this below). And do not believe a debt collector who claims that you will face additional penalties if you don’t immediately make at least partial payment—this often is an outright lie, and even if the collection agency does tack on an additional penalty, it almost certainly will agree to waive that penalty if you do eventually agree to pay the debt.
When you receive the letter, if you have any doubt at all about the validity or size of the debt, research it. Go through your old bank or credit card records and loan-payment receipts, etc., or contact the original biller to try to determine whether the debt is truly yours and whether you already have paid it. Try to confirm the size of the debt, too—collection agencies often tack on penalties and interest fees without disclosing that they have done so.
Next, try to determine whether the statute of limitations on the debt has expired. These laws vary by state and type of debt, but in many cases, the collection agency cannot legally sue for repayment if the debt went into default more than four to six years earlier, though there are exceptions. If you live in a different state than you did when you originally incurred the debt, it might be especially difficult to determine whether the statute of limitations has expired—in these cases, it is up to the courts to decide which state’s laws apply. And in some cases, the original biller might have designated in a contract you signed that the laws of a different state would apply.
Of course, the fact that the statute of limitations may have expired so that you cannot legally be sued for repayment would not mean that you do not have a moral obligation to pay a debt you owe. But it does dramatically improve your negotiating position if you cannot determine whether you truly owe the money…or if the collection agency is trying to tack penalties and fees onto the bill.
Helpful: Entering the following into a search engine will produce details for many, though not all, states’ statutes of limitations. Type “site: NationalList.com”…the name of your state…“statute of limitations”…and “consumer debt.”
Send the collection agency a certified letter explaining why the debt is not owed…or call and negotiate a payment. If the debt is not yours or already has been paid, explain this in simple terms in your letter—for example, “This debt is not mine. You have the wrong person” or “My records indicate this debt was paid on February 8, 2010. I have enclosed a copy of the check.” Be sure to include evidence that the debt is not yours (such as a different Social Security number than the one associated with the debt)…or that the debt has already been paid…or that the statute of limitations has expired. Also write, “Please do not contact me again.” Save a copy of this letter. Once you have told a collection agency not to contact you, it is legally barred from doing so unless it needs to inform you that it is suing.
If the debt is valid, negotiate before paying anything. Collection agencies often reduce balances, including interest and fees, on old debts. If the statute of limitations on the debt has expired, you are in an especially powerful negotiating position—make it clear to the collection agency that you know about this expiration.
What to do: Insist on written confirmation that once you make the negotiated payment, the debt’s balance will be listed as zero—and do not send any payment until you have received this confirmation. Since there is no clear-cut rule or law governing e-mail in an attempt to collect a debt, it is best to write a letter and send it by certified mail with return receipt.
If the collection agency sues you, show up in court to challenge it. Collection agencies generally are required to sue in a court system that is geographically convenient for the debtor. And you do not necessarily need to hire a lawyer. Many consumers who show up in court to plead their case are successful in having the debt dismissed. If you do not show up, the judge might issue a “default judgment” in the collection agency’s favor even if the debt is not legitimate.