Dear Penny: Can My Mom Stop Paying Her Zombie Debt Without Hurting Her Credit?
My 81-year-old mom fell victim to a debt collector for a decades-old debt. They even told her she had to go to court over the phone. I begged and pleaded with her not to fall for it, but they scared her and she has been sending them $200 a month for a year now. I told her to stop paying, but can they now tell her she has been paying so it’s no longer a phantom debt? She kept telling them she didn’t owe, but they took advantage of her age. She has good credit, and they told her they would ruin her credit. I want her to stop paying. Thoughts? Thank you.
— Concerned for my mom’s finances
Dear Concerned,
Your initial advice to your mother was correct: Decades-old unpaid debt, or zombie debt, is still owed to creditors, but it’s past the statute of limitations that lets you be sued for it and it’s fallen off your credit report. That renders the debt lifeless, because you no longer face consequences for not paying.
However, making any payment toward the debt resurrects it, because you’ve acknowledged you still owe. Predatory debt collectors use intimidating tactics like they did with your mom to convince borrowers to make payments, so they can go after the debt more aggressively. The debt is now likely showing up on her credit report again, and the clock has restarted on the statute of limitations for a lawsuit. Stopping payments now could hurt her credit score and leave her open to a potential lawsuit.
Her first line of defense now is to demand a debt validation letter from the collector. The agency will be required to send a document within five days outlining how much she owes, who she owes it to and her options for disputing the debt. After receiving this, she can respond within 30 days with a debt verification letter, a formal request for the collector to send proof she owes the debt.
Such old debt has probably changed hands several times, so it’s possible the collector won’t be able to produce this information. If that’s the case, she should be able to stop making payments. Contact a lawyer or nonprofit credit counselor for guidance on how to stop the debt collector’s harassment.
If the collector can prove she owes the debt, she can continue with her current payment plan or try to negotiate a lump-sum settlement.
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The other option is to stop payments and wait out the clock on the statute of limitations again — that’s three to 10 years, depending on your state. If the debt wasn’t enough to incentivize a lawsuit in the past, it’s possible she won’t get sued this time, either. And if she does, the worst outcome will likely be a payment plan similar to what she’s on now. This option comes with risk and the stress of the unknown, as well as continued contact from debt collectors, so make sure she understands these consequences before taking this route.
Dana Miranda is a Certified Educator in Personal Finance® and author of YOU DON’T NEED A BUDGET. She writes Healthy Rich, a newsletter about how capitalism impacts the ways we think, teach and talk about money.
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