What is a Zombie Debt?
Zombie debt is debt that has been long forgotten about and has probably been written off as uncollectible. But zombie debt can rise from the grave, if a debt collector attempts to collect on it all over again, even when the debt is too old to legally pursue. The original creditor will most likely have given up on the debt and sold it on to a debt collection agency.
Each state has a law referred to as a “statute of limitations,” which spells out the time period during which creditors or collectors may sue borrowers to collect debts. 6 years in each state and territory, 12 to 15 years (depending on the State & Territory) for Judgment debts. In other words, if 6 years passes without a payment on the loan, it could be statute-barred and it cannot be collected by your creditor.
However...If you make a payment, the 6-year statute period could begin again. If you admit the debt in writing, the 6-year statute period could begin again. If your creditor secures judgment against you in court, your creditor will have 12 to 15 years to collect the debt (depending on the State or Territory).
If you think your debt maybe statute-barred, be careful, it could be complicated to find out if you’re responsible for paying your old debt -a simple phone call to your creditor could potentially lead to nullifying the debts statute barred status!
What to do
If you suspect your account has reached the limitations period, or close to, chances are your debt will no longer be with the original bank, but long since been sold to a debt collection agency. The agency won’t know where you are otherwise, they’d be contacting you years ago to collect the debt.
Prior to the limitation’s expiry period, the debt collectors will begin a proces to track you down. If they reach you, they will press you to make a payment, on threat of legal action, to begin the 6-year limitations term again, even a $5 payment could achieve this.
Your first step will be to reach-out to a professional who can properly represent you without risking the renewal of the limitation period.
A specialist, like a financial negotiator, will safely confirm the statute-barred status without exposing you to any risks.
If you want to handle this yourself, be very careful, you could unwittingly ‘reset’ the debt to 6 years again.
If you think you have a zombie debt, reach-out to us to seek more information on your options. Call us on 1300 501 424 or contact@tarrasoletang.com.au.
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This article should not be interpreted as legal advice. If you are seeking specific legal guidance, please speak to a legal professional for more information on your legal rights.