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Zombie Debt: Know Your Statute of Limitations and Other Debt Collection Laws


***Update: See the 4/2/12 post on recent Court of Appeals cases related to the statute of limitations for debt collection in Oregon***

We’ve been getting a run of questions from people who want to know the statute of limitations on their consumer debts, but the length of this blog post got away from me once I realized how interesting (and relevant!) this subject is in these tumultuous days of “lendor industry meltdown,” though the little guy, once again, may be getting short shrift.

If you are contacted about a debt (paid or unpaid), our recommendations:

1) Take it seriously, very seriously, and prepare to do some research
2) Research the Oregon laws to find the statute of limitations and debt collection laws
3) Read LASO and OSB materials on debt and related consumer law issues
4) Visit your library and read self-help books on debt and debt collection
5) Consult an attorney!
5) Read about Zombie Debt, below:

(Coincidentally, this past Sunday’s Parade Magazine also had an article about these same debt and statutes of limitation issues:

Excerpt: “… Don’t pay money you don’t owe: Because debt collectors often are working with old data that have been through many hands, their records are sometimes wrong. If you don’t believe you owe the money or if the amount claimed by the debt collector is incorrect, dispute the claim in writing. The collector is obligated to show you some proof that you owe the money—at least a statement from the original creditor attesting that the information is correct. If the collector is calling about a debt you incurred long ago, be aware of the statute of limitations. Like a gallon of milk with a “sell by” date, debt can become too old to be useful to collectors. The statute of limitations differs from state to state but typically runs three to six years. After that, a debt collector can’t sue to collect a debt. If a collection agency states or implies that you have to pay a debt whose age exceeds the statute of limitations, it has broken the law. Always check the date of your debt: Paying even a small portion of an expired debt may reaffirm the debt and trigger the obligation to repay it in full. …” (read full article).)

How Stuff Works: How Zombie Debt Works has a story about zombie debt. Excerpt:

“Zombie debt gets its name because the debts in question are supposed to be dead and buried since:

1) They’ve been settled in bankruptcy proceedings.
2) They’re the result of mistaken identity or identity theft, so they were never your responsibility to begin with.
3) Their statute of limitations has expired.

These debts are reanimated by collection agencies hoping to make some extra profits.

You know the guy in the B movie who seals his own doom by panicking and getting himself cornered by the relentless zombie army? Zombie debt collectors expect you to be that guy. They make their profits from consumers who don’t know their rights, don’t know how to protect themselves, and panic….” (link to full article)

Read more about “Zombie” Debt:

1) MSN Business, ‘Zombie’ debt is hard to kill: Companies now buy ancient bad debts for pennies and squeeze you to pay. Here’s how to get them off your back, by Liz Pulliam Weston

2) And another article here, and here, and here. The Zombies Really ARE Here!

3) And a longer report from the FTC: on Collecting Consumer Debts: The Challenges of Change, by the National Consumer Law Center, on behalf of its Low Income Clients and the National Association of Consumer Advocates, June 6, 2007

4) And then there are the Fake Debt Collectors.

If you have unpaid debt, educate yourself! Visit your local library, read consumer law information on the web (e.g. LASO or FTC), and contact your state’s consumer law agency (often at the state’s attorney general’s office).

And from creditors and debt collectors:

1) Association of Credit and Collection Professionals homepage, Code of Ethics, and Separating Fact from Fiction

2) Courts, Congress send mixed messages to debt collectors, from the New Hampshire Business Review, 7/27/07.

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3 responses to “Zombie Debt: Know Your Statute of Limitations and Other Debt Collection Laws”

  1. Anonymous says:

    All together, now: Talk To An Attorney IMMEDIATELY!!

    “The Parade magazine comment about debt collection is misleading, at least for Oregonians. In Oregon, nothing prohibits a debt collector from filing a complaint on a debt that is barred by the statute of limitations. The defense that the action is time-barred is an affirmative defense, so that it has to be plead; usually in a Rule 21 motion. But if the defendant is unsophisticated (and unrepresented) the court will probably not raise the defense for him or her. In other words, a collector can file suit for a debt that is far beyond the applicable statute (and of course there is not just one statute of limitations, but several) and if the defense is not properly plead, the debt collector wins.

    All together, now: Talk To An Attorney IMMEDIATELY!!

  2. Anonymous says:

    Very accurate statement. You must plead SOL as a defense, or the judge may enter a default judgment against you if you fail to appear. However, it is unethically for an attorney to file a suit when he/she knows and should have known the SOL had pasted. I'm unaware if there is any penalty or law prohibiting an attorney from filing a suit after SOL has pasted.

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