In an honest world, we would expect that when someone pays down a debt, settles it, or discharges it in bankruptcy that is would be no more because it would no longer be legally enforceable. As many Las Vegas consumers know, we do not live in an honest world.
Truth is, there’s a lot of money to be made on very old debts. Banks will take loans that they think will never get paid, bundle them, and then sell them to third parties at a discount. These third parties, called “zombie debt collectors” in the credit industry, then use the legal system to enforce the debts. Because they bought the bundle at a discount, they don’t need to succeed with every debtor—just enough to make it worthwhile. Often it is.
For example, the Denver Post discovered that a Virginia-based zombie debt collector named Portfolio Recovery Associates paid only $1.6 billion for $52.9 billion of consumer debt, a 97 percent discount.
Contained in these bundles is usually nothing more than a computer readout with a name, an account number, and a balance. With just this information, the company goes on a collection spree: reporting it to the credit agencies as unpaid, locating the debtor and harassing him or her with phone calls, and ultimately filing lawsuits against them. The collector hopes that the cost of the lawsuit is greater than the value on the debt, making it worthwhile for the debtor to pay money that is no longer owed. In many instances, the collector obtains a default judgment, making it much more difficult for the putative debtor to dismiss the case.
Here’s how to defeat the zombie debt collector:
- Hire a competent lawyer
- Respond to all lawsuits and assert the following defenses as applicable:
- Statute of limitations – these debts are usually long past their collection date
- Failure to state a claim – if the debt has been paid off or settled, the collector cannot sue you for it
- Assert all claims against the collector
- Violation of the Fair Debt Collection Practices Act and Fair Credit Reporting Act – collecting zombie debt is illegal and these laws provide civil remedies, often with punitive damages against the collector
- Violation of the discharge – here, your lawyer will go back to the bankruptcy court and obtain a contempt order against the creditor, this usually results in attorneys fees
Zombie debt is a toxic nuisance for people in Las Vegas, and they should not tolerate illegal efforts by collectors.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation by calling 702-880-5554.