What is Zombie Debt and How Do You Deal with It?

If you’re a resident of Mobile, Alabama, you may have heard the term “zombie debt” and wondered what it means. Zombie debt refers to old or expired debt that has been “raised from the dead”. This debt resurfaces unexpectedly, often years after you thought it was resolved. This could be debt you genuinely forgot about, debt that’s too old to be legally collected anymore (time-barred debt), or even debt that belongs to someone else entirely (identity theft).  

Debt collectors in Alabama may try to collect on this zombie debt, even if they lack the legal right to do so. This can be incredibly stressful and confusing for Mobile residents, negatively impacting their credit scores and ability to obtain loans.   

Why Does Zombie Debt Appear?  

There are several reasons why zombie debt might resurface: 

• Forgotten Debt: Sometimes, in the hustle and bustle of life, old debts can slip our minds. Maybe you moved, changed jobs, or had other major life events that caused an old debt to be forgotten. 
• Debt Past the Statute of Limitations: Each state, including Alabama, has a time limit (statute of limitations) on how long debt collectors can sue you to collect a debt. If the debt is outside this limit, they can’t take legal action. However, some unscrupulous debt collectors may still try to pressure Mobile residents into paying. 
• Debt Belonging to Someone Else: Identity theft is a growing problem in Mobile and across the country. This can lead to debt appearing in your name that you didn’t actually incur.  
• Clerical Errors: Mistakes by creditors or debt collectors can lead to inaccurate information about your debts, even if you’re diligent about your finances in Mobile. 

The Impact of Zombie Debt on Mobile Residents  

Zombie debt can have serious consequences for consumers in Mobile and throughout Alabama: 

• Negative Impact on Credit Score: Unpaid or disputed debts can significantly lower your credit score, making it harder to qualify for loans or credit cards at favorable interest rates. This can be a major obstacle if you’re trying to buy a home, start a business, or make other financial moves in Mobile. 
• Difficulty Obtaining Loans or Credit Cards: A low credit score due to zombie debt can hinder your ability to secure financing for a car, house, or other major purchases. Even if you can get approved, you may face higher interest rates that cost you thousands more over the life of the loan. 
• Stress and Anxiety: Dealing with debt collectors can be extremely stressful and anxiety-inducing, especially if the debt is not yours or you believe it’s been resolved. This stress can impact your work, relationships, and overall quality of life. 

Identifying Zombie Debt in Mobile   

Here are some red flags that might indicate that you are dealing with zombie debt: 

• Vague or Incomplete Information: The debt collector may be unable to provide clear details about the debt, such as the original creditor, date incurred, or amount owed. If a Mobile debt collector can’t substantiate the debt, that’s a big warning sign. 
• Unfamiliar Debt: You have no recollection of ever incurring the debt, and it doesn’t match your financial records. 
• Sudden Credit Report Appearance: The debt appears on your credit report after you thought it was settled, which you may discover when applying for a loan or credit card. 

Your Rights Regarding Debt Collection in Mobile, Alabama  

Alabama law protects consumers from unfair debt collection practices. Here’s an overview of your rights: 

The Alabama Statute of Limitations on Debt 

The time limit for debt collection lawsuits varies depending on the type of debt. In Alabama, the statute of limitations for credit card debt is three years, and the same holds true for other types of open accounts such as medical bills. With oral and written contracts, judgments, and unpaid rent, the statute of limitations can range from six years to as long as 20 years. Speak with an experienced attorney to discuss the statute of limitations for the particular type(s) of debt you are dealing with. 

The Fair Debt Collection Practices Act (FDCPA) 

This federal law, which covers Mobile residents, restricts how debt collectors can communicate with you. They cannot harass you, threaten you, or use deceptive tactics to collect a debt in Mobile. The FDCPA also allows you to dispute the debt and request that the Mobile collector cease communication. You can file a complaint with the Federal Trade Commission (FTC) if a Mobile debt collector violates the FDCPA. 

Dealing with Zombie Debt Collectors in Mobile  

Here’s how Mobile residents can handle debt collectors trying to collect on zombie debt: 

Requesting Debt Validation 

You have the right to request a debt validation letter from the collector. This letter should provide details about the debt, including the original creditor, date incurred, and amount owed. You can find a debt validation letter template online and send it to the debt collector. 

If the information in the letter is inaccurate or incomplete, you can dispute it with the collector in writing. 

Cease and Desist Letters 

If the debt collector continues to contact you after you’ve disputed the debt or requested them to stop, you can send a cease and desist letter. This letter formally instructs the collector to cease all communication with you. 

Protecting Yourself from Future Zombie Debt

Here are some tips for Mobile residents to minimize the risk of encountering zombie debt in the future: 

• Monitor Your Credit Report Regularly: You are entitled to a free credit report from each major credit bureau (Equifax, Experian, and TransUnion) annually. Mobile residents should regularly review their credit reports for any errors or inaccuracies, including unfamiliar debts. You can access your free credit reports at https://www.annualcreditreport.com/index.action. 
• Keep Detailed Financial Records: Maintain a file of important financial documents, including loan agreements, payment records, and communication with creditors. This can help consumers quickly identify and dispute any inaccurate zombie debt that appears. 
• Be Cautious About Sharing Personal Information: Identity theft is a common cause of zombie debt. Mobile residents should be careful about sharing sensitive personal information, especially online or over the phone.  
• Consider a Credit Monitoring Service: Many credit monitoring services will alert you to changes in your credit report, including new debts. This can be a helpful early warning system for consumers. 

Overwhelmed with Debt? Contact Padgett & Robertson to Discuss Your Legal Options 

Whether it’s zombie debt or current debts that you are struggling with, there are options to help you obtain financial relief. In some cases, your debts can be resolved through negotiation, but in other cases, it might make sense to consider either Chapter 7 or Chapter 13 bankruptcy. 

At Padgett and Robertson, we are here to help you obtain a new lease on your financial life. Contact us today to schedule a consultation with a member of our legal team. We look forward to serving you!