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Zombie debt can wreck your finances

Debt is part of life for most Americans. Your experience with debt may have begun with a credit card in your teens, a student loan for college, then eventually your first car payment. If you have a mortgage, you may never see a time when you do not owe somebody your hard-earned money.

Did you know that debts have an expiration date? It's true that after a certain amount of time passes without a payment, a creditor or debt collector forfeits the right to take legal action against you for the outstanding balance. You may feel some relief when the statute of limitations passes on your debt. However, they don't call it "zombie debt" for no reason.

How debt collectors revive old debt

In Tennessee, the statute of limitations on debt is six years. This does not mean the debt is gone or that your creditors will not continue to contact you for payment; it means only that the creditor may not sue you to collect it. A debt collector may purchase old debts from a creditor and attempt to collect on them. You may receive phone calls pressuring you to make a payment on your past due account.

If you make one payment, even a dollar, on an expired debt, the debt is resurrected, and the creditor has the right to sue you to collect. This is where such debts get the name "zombie debt." Zombie debt can include any debt you thought you were through with that appears again, for example:

  • You already settled a debt for a lower amount with a creditor, and a collector is trying to obtain the portion the creditor forgave.
  • Someone stole your identity and put fraudulent charges on a credit account.
  • Your forgot about a debt, such as an old credit card, and the statute of limitations has passed.
  • A collector tries to recoup the portion of a debt discharged through bankruptcy.

Contact with a creditor or debt collector can be unsettling, and debt collectors are counting on your confusion and anxiety. They want you to send a payment to revive the debt. It is important that you have as much information as possible about your rights and responsibilities. For example, before agreeing to make a payment, you can request a validation letter to verify that the collector has the right to pursue the debt. This may prevent you from making mistakes that can cost you dearly in the long run.

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Rothschild & Ausbrooks, PLLC
1222 16th Avenue South, Suite 12
Nashville, TN 37212

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