This week I received a panicked email from one of our clients. Her bankruptcy was discharged over 18 months ago. Since then, she has been working hard to rebuild her credit and manage her budget successfully. Her recovery from bankruptcy was well on track, so I was surprised to hear from her and even more surprised at the question she asked.
“Can they really do this?”
A debt collector was threatening to have her arrested unless she contacted them immediately to arrange payment. This was a debt listed in her bankruptcy which was discharged. Fortunately, the email was a complete fraud and I was able to reassure our client with a quick reply. Unfortunately, this is an increasingly common problem for people who have filed bankruptcy. Many end up paying debts that were covered in their bankruptcy discharge.
What is Zombie Debt?
“Zombie” or “Junk” debt is old or uncollectable debt that has been sold or assigned to a collection agency for pennies on the dollar. The collection agency can often score big if it is successful in convincing a consumer to pay the zombie debt. Because of this potentially big payoff, an agency dealing in zombie debt will often use underhanded and illegal tactics to convince you to pay. The threat of arrest is common, along with threats of garnishment, foreclosure, notifying your employer and family.
How Can You Protect Yourself?
- Don’t admit you owe the debt! Chances are, this isn’t a debt you owe. Don’t agree to a payment plan or make any statements acknowledging that this is your debt. Request the collector mail you validation of the debt, as required by the Federal Fair Debt Collection Practices Act.
- Be suspicious! Listen carefully and read the fine print! A quick read of the email sent to our client revealed disjointed and nonsensical language that indicated the collectors were probably based overseas. Often the timeline for making a decision or a payment arrangement will be less than 24 hours. This should be a huge red flag. No one can pursue legal action in that short of time – the quick deadline is intended to make you commit before you have a chance to check out the collector and the debt.
- Contact your attorney! If you filed bankruptcy and believe the debt was included, check with your attorney before responding to any demand for payment. Many attorneys have form letters that they will either send for you or give you to send off to creditors. If a creditor doesn’t stop attempting to collect, a suit could be filed against the creditor for violation of the discharge injunction.
The best defense against zombie debt collection is being aware that it exists. Knowing that a creditor may try to collect a debt you are not obligated on will help to protect you and your finances going forward. Bankruptcy offers excellent relief, and we are here to help you protect it!
If you have questions about Chapter 7 and 13 bankruptcy, we hope you’ll come in for a free consultation with an experienced Colorado bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.
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