Credit Card Debt Management

So you may think that if your credit report shows accounts that are “charged off” or “written off,” you got off scot-free. That is not true. It does not go away. It becomes “Zombie Debt” and it will haunt you, very likely until the day you die.

Zombie debt has been purchased by collections agencies from lenders for pennies on the dollar. These third-party collectors have real incentive to collect on the old debt because anything they collect is their own profit to keep, not to be shared in the least with the lender. So they pay up to 12 cents per dollar for delinquent debt that is not yet charged off, 7 to 9 cents per dollar for recent charge-offs and so on. They will even buy debt that other third-party collections agencies have already worked on (unsuccessfully).

Unbelievably, for a penny or less per dollar, these companies will even buy debt that is written off and outside of the statute of limitations for any kind of lawsuit. That’s why it pays to know the statute of limitations in your state because a creditor may threaten to sue you for an old debt and you’ll know whether that’s even possible. If it is out-of-state debt, consult the statute of limitations for the state where you are currently living.

So to avoid harassing phone calls and, for a time, the potential of a lawsuit, settle the debt. The bonus is that you will have more negotiating power with third-party collectors because any payment is a profit for them. Just keep the offer decent and fair, keeping in mind the basic fact that you do owe the money.