“Zombie debts,” or bad debts that have been around for years, have a statute of limitations on when a creditor can sue for payment.
The statute of limitations varies by state, but it’s typically six years for being sued, and seven years for the debt being reported on a credit report, says Shane A. McClelland, a consumer lawyer in Ohio who focuses on defending against debt collection. The range for most states is three to 10 years.
A debt collector who threatens to sue after the statute of limitations has expired is violating the Fair Debt Collection Practices Act.
There are a few ways the statute of limitations can be extended, and debt collectors can continue going after the debt even after the time has passed. They can still seek voluntary payment even though the law can’t force a debtor to pay.
But collectors can’t extend the statute of limitations and legally require debtors to pay by passing the legal rights to the debt to another collector, say McClelland and other attorneys.
Why zombie debts are chased after
Even if the statute of limitations has expired on debts, collectors can still legally seek the money, although they may have a harder time collecting it without a winning lawsuit in hand.[pull_quote align=”left”]”Often times we see people come through our practice with a debt from 10 years ago, or a debt they thought was paid off years ago,” says Shane A. McClelland, a consumer lawyer in Ohio.[/pull_quote]Some people want to pay off their debt, or they can be pressured by a collector to make payments and be scared of ruining their credit.
“Often times we see people come through our practice with a debt from 10 years ago, or a debt they thought was paid off years ago,” McClelland says.
“In the end these collection companies bundle loads of consumers together and then sell them to third-party debt collection agencies for pennies on the dollar, to at least try to make some money off the collection efforts,” he says.
How statute of limitations is extended
If the statute of limitations is about to expire and the bill collector convinces the debtor to make only a small payment, then the clock starts again on being required to legally pay the debt.