When I was in my late 20s, I had just gotten married and rented a small studio apartment in Brooklyn, New York. I had grown up in the South Bronx all of my life until that point in an apartment. I had never had to worry about gas meters, electric bills, forced recycling, or other utilities before, let alone rent. I was renting an apartment in a private house, and it was a new experience. Anyway, as I converted the utilities into my name to differentiate myself from the previous tenant, I got a crash course in how forgotten debt comes back to life.
The apartment I had just rented had been uninhabited for several months before I moved in. And the previous tenant had stopped paying their gas bills for months before vacating.
After I had changed the gas meter into my name so that I could receive bills in my name, I got several calls from the gas company. One operator talked to me in the tone of a TV detective and had deduced that I was actually the previous tenant trying to get out of paying the outstanding debt.
The operator condescendingly but calmly asked me to admit that I owed the bill of the previous tenant.
I hung up on the operator. I think they knew I was not the previous tenant. But they desperately needed to get the previous bill paid.
By any means necessary.
Zombie Debt (Forgotten Debt Comes Back to Life)
I had unwittingly reactivated a forgotten debt, also known as a “zombie debt” after converting the gas meter account in my name.
You can activate forgotten debt without half trying. It could be your debt or a stranger’s debt that a collection agency is trying to get you to pay.
You have a lot of rights and options when forgotten debt comes back to life. We will get into all of that.
But first, what is a forgotten debt and how does it come back to life?
What is a Forgotten Debt?
The typical American owes over $90,500 in active debts. But these are active debts that they are in the process of paying off.
Forgotten debts are debts that are completely paid offs, delinquent, zombie debts, or settled debts that have been reactivated.
OK, so if the debt was forgotten or zombified, how did it get reanimated and financially reactivated?
When forgotten debt comes back to life, what is the catalyst?
Forgotten debts are usually very old debts that have been reactivated via the activities of collection agencies. Unpaid debts can stay on credit histories for seven years, but collection agencies keep records.
And collection agencies pass around and sell each other debt histories.
If you applied for a new credit card a lender may have made inquiries that got the attention of collection agencies.
When forgotten debt comes back to life, it may be because of a paid-off debt that is mistakenly believed to be unpaid.
Did you pay a portion of a long-forgotten debt or answer a collection agency letter? That action may have revived the forgotten debt.
Sometimes the forgotten debt may not even be yours. The collection agency may have chosen you as a mark to pay someone else’s unpaid debt based on previous history dealing with you.
Over 49% of consumer complaints about debt collectors is that they are being harassed to pay debts they don’t owe.
There are many reasons why forgotten debt can come back to life.
However, you can’t be legally compelled to pay off forgotten debts. Many forgotten debts have passed the statute of limitations. In many states, if you have not paid off the debt within three to six years, you aren’t legally liable to pay it anymore.
So, if you are being harassed about forgotten debt, what should you do?
When Forgotten Debt Comes Back to Life
Whatever the reason, debt collection agencies may begin harassing you to collect very old debts. And since collection agencies are notorious for lying and harassment tactics, it might not even be your debt.
Here is how to protect yourself.
Keep Exact Records of Debt
Keep exacting records of your debts, payoff records, and contracts. Get a free copy of your credit report annually. Many credit cards offer you access to your credit report free as a perk.
Getting a harassing call accusing you of unpaid debt can be shocking. Be aware of your debt status so you aren’t conned into believing lies.
Don’t Offer Information
If a debt collector calls you demanding personal information, hang up. They know who you are and what you owe. Answering their questions can only help them in legally harassing you.
If you do want to get talky, ask them for their identity and contact information. You can send them a letter demanding they stop contacting you, especially if the debt is not yours. Make sure the letter is certified with a return receipt request.
Don’t Try to Repay Old Debts
Most people are good-natured, and we are told to pay off debts.
However, depending on what state you live in, debt collectors lose the legal right to be paid after three to six years if the debt has not been paid.
Look up the statute of limitations for debt in your state relative to collection agency activity. If you have forgotten debts that have passed the statute of limitation in your state, then forget it.
Trying to repay it or contacting a collection agency automatically restarts the statute of limitations anew.
If you think you may owe a forgotten debt, ask the collection agency to provide proof in writing.
Now, the collection agency is legally required to provide proof of the debt. Now they have to show proof or stop contacting you.
The point is that if you are past the statute of limitations for collections, you don’t have to pay anything. Tell them in writing to stop contacting you or file a complaint with the Federal Trade Commission.
Don’t Take Out A High Interest Loan To Cover The Debt
One mistake a lot of people make is borrowing at excessive interest rates to cover the bill. What you want to do is draw on your savings or try and find a low cost way to cover the bill. Don’t get a high interest or payday loan!
Know your rights, and know your debt history, and when forgotten debt comes back to life, you can treat it like the toothless menace it is.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.