"Zombie debt: Sometimes it’s best to let dead debt be" from WAPO

[AceTen]

Here's a new article about Zombie Debt from Washingto Post if anyone is interested. It's a soft paywall so you get a few articles a month free or you can view in icognito window or prime members can join for a free WAPO trial last I checked.

https://www.washingtonpost.com/business/personal-finance/zombie-debt-sometimes-its-best-to-let-dead-...

By 

Michelle Singletar

Columnist

November 30, 2019 at 8:00 a.m. EST

Let me say this up front. If you borrow money, you should make an honest effort to repay it.

But when life interrupts your ability to handle your liabilities — say, by a job loss or medical crisis — state laws say creditors can’t use the courts to chase you forever.

Debt collectors have a limited number of years in which they can sue someone to collect. After the time runs out, certain unpaid open-ended consumer debts, such as credit card debt, are considered “time-barred.” You still owe the money, but at some point your old debt becomes uncollectible through the courts.

[Anonymous]

First, thank you AceTen for bringing this to our attention!

Correct me if I'm wrong, but I always understood the 7 year cut off\time bar rule prevented old debt from effecting one's credit. So how then can it still have a negative impact as the article claimed?

Other than debt collectors trying to get someone to pay?  I'm sure someone here might be able to share the info the article failed to explain.

[Anonymous]

I once read finance company loans can be 10 years bad debt and they can actually go to a judge and ask for an additional 10 years.  They are not only the most aggressive lenders but also the longest term aggressive debt collectors. Years later, if you get new credit you will still see them SP'ing your reports (like 13-15 years later).  They don't want you to recover.

[Anonymous]

I heard that once a debt is dropped off, never go back and repay as the creditor has the right to report it again, and even though it would be a zero balance, it would still have all the payment history and everything with it to mess up ones score.

[Lucifer]

I've heard this as well and not worth the risk for anyone who wanted to make good on an old debt.   It would be a spiteful move on the part of the collector and just not worth the risk for anyone that may have one of those old zombie debts.

[Revelate]

Statute of Limitations is defined on a state by state basis; I think the only exception to that is specifically debts underwritten by the Federal government but I'm not an expert, like at all, on that one other than to say the IRS and federal student loans are stardized everywhere AFAIK.

Credit reporting is standardized as far as exclusion periods, but for how long you actually owe the debt is another thing entirely.  Anecdotally from random tidbits on the forum SOL for some common forms of debts can be anywhere from 4 to 10 years depending on state.  Some debts can be extended but in practice this is almost never done given the legal costs is my understanding.

[Anonymous]

Yea it would be spiteful and honestly, its incredibly stupid they have that right. I would be very curious to know how many people would be willing to pay off debts or settle if this re-reporting capability was disallowed.

I wonder though if you got something from them stating they are willing to settle and not report it, is that legally binding?

[Lucifer]

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@Anonymous wrote:

Yea it would be spiteful and honestly, its incredibly stupid they have that right. I would be very curious to know how many people would be willing to pay off debts or settle if this re-reporting capability was disallowed.

I wonder though if you got something from them stating they are willing to settle and not report it, is that legally binding?

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I have a relatively small debt outstanding from many many years ago.   I would like to pay it off.   It is time barred from legal action in my state and well past reporting periods but just the risk it could go back on my credit reports has me steering well clear of it.......    

I agree, there should be something that restricts debt like this from ever having the ability to go back on the reports.    Even just the presence of it as a paid collection from year XX for the next 7 years on my report would be a killer  - For scoring? Maybe or maybe not but for a manual review?????    Ouch - that would hurt like hell.