Clark Howard: Zombie Debt - What is it and can you protect yourself?

DAYTON — Identity theft doesn’t just impact your life when it happens it can mess up your finances for years.

Consumer advisor Clark Howard breaks down how you can fight back when faces with debts you don’t owe.

Howard said he hears from people all the time that are faced with bills for debts, and you can’t even figure out what they are. So, before you take that debt at face value, follow some of Howard’s advice.

Threatened to take legal action, attempted to collect debt not owed, false statements are just a few of the nearly 200,000 complaints received by the Consumer Financial Protection Bureau about debt collection in 2019.

If you are contacted by someone claiming you owe a debt, don’t just pay it, but don’t ignore it either. The absolute best thing to do is ask for proof of debt.

The debt may be expired, which happens after seven years, or maybe a debt you ever owned.

Debut buyers will often purchase old debt sometimes referred to as Zombie Debt for pennies on the dollar and try to collect the original amount.

Harassment and threats of filing a lawsuit are common. They may even offer to leave you alone if you pay a portion of the debt. Howard said it’s important to do your research before you pay a dime.

If you do receive a court summons, do not ignore it. Ignoring it automatically makes you responsible for the debt. Go to court and demand proof that you are the owner of the debt.

This is truly a case of what you don’t know can hurt you. You don’t want some UFO credit collector coming out of nowhere.

Howard said to set up an account with Credit Karma where you can track your credit for free. They will automatically send you alerts if there’s a change to your credit.

Here is a story from our sister station at WSB-TV in Atlanta that talks about a woman who had her wages garnished after learning about debt she didn’t own:

A woman in the Atlanta metro area is paying for a decade-old debt that isn’t hers. A company is now garnishing her wages of $700 a pay period.

Even though the woman has documents that prove she’s a victim of identity theft and the debt isn’t hers, Justin Gray who is a consumer reporter for our sister station WSB-TV learned she may still be on the hook for this money because of wage garnishment rules.

Sherrel Dunn said she didn’t see a 2009 lease for a Stone Mountain apartment in her name until years later.

“During that time, I was married and a homeowner,” Dunn said.

According to Dunn, she only found out about the lease and the debt after a debt collector started garnishing her wages more than a dozen years later in December 2022. They deduct $700 per pay period.

Not only did Dunn say she never rented or lived in that apartment, but she also long ago reported that she was a victim of identity theft. Dunn even signed an affidavit with the IRS in 2011 stating her identity was stolen.

“You just feel violated. You feel helpless, as I did when I first learned my identity was stolen,” Dunn said. “I had to deal with all these collection agencies calling me and sending me mail.”

Georgia law allows debt collectors to go after these old debts and charge interest that sometimes adds up to be more than the original amount owed.

“It might feel like it comes out of nowhere because it was so long ago,” explained Jillian Sant, an attorney who specializes in helping customers fight debt collectors. She agreed to look at Dunn’s case pro bono after WSB-TV contacted her. “I’ve actually seen a lot of identity theft cases, and they seem to be increasing,” Sant said.

Georgia law allows debt collectors to renew judgments every seven years-- indefinitely. That means years after a debt, wages can be garnished without warning, like in Dunn’s case.

“So over time, if you are renewing this judgment, it’s going to grow and grow and grow and grow and grow. And suddenly when life is better, you’re going to get hit with this massive garnishment,” Sant said.

As an identity theft victim, Dunn is scared to throw old records away. She still had utility bills and student loan statements with her real address, proving she did not live in that Stone Mountain apartment. She also had that ID theft affidavit with the IRS to prove she was an identity theft victim. But with all that her garnishment challenge was still rejected by a Gwinnett County judge.

“This seems so obvious, so simple. It seems like this should be an easy fix,” Dunn said.

To the courts, it did not matter how much evidence Dunn must prove she never rented that apartment because according to court documents, Dunn didn’t respond to a summons about the debt in 2012.

“Once there’s a judgment in place, you must undo the judgment to even get to assert those defenses. And that can be an insurmountable hurdle,” Sant said that means according to Georgia law, the garnishment is legal.

Dunn must pay directly from her paycheck. It doesn’t matter if the debt was legitimately hers, to begin with.

“I feel like I’m not only the victim to the identity thieves, but I’m also a victim to our system because I have no one to help me,” Dunn said.

Since WSB-TV got involved, the company dismissed the debt against Dunn, but Sandt told Justin Gray, that doesn’t mean they cannot come after the debt again in the future.

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