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5 states with the most "zombie debt" complaints

Paying off your debt
Paying off your debt 05:53

Zombie debts have come back with a vengeance. Debt buyers pull these expired obligations out of cold storage and often use abusive and illegal tactics to collect. Zombie debts generally started out as legitimate obligations that had been settled, paid off, discharged in bankruptcy or rendered uncollectible because of various state statutes of limitation. 

However, these uncollectible bills are often repackaged with other delinquent loans and sold into the secondary market, generally for pennies on the dollar. Buyers of this debt then attempt to collect on all of it -- including the expired obligations -- bringing the expired debts back from the dead.

"By all rights, this is debt that should have been extinguished, but it continues to come back to life," said Rowan Tepper, senior analyst at RewardExpert, which recently completed a study of zombie debt complaints that had been filed with the Consumer Financial Protection Bureau going back to 2011.

This analysis found that complaints about zombie debts have soared in recent years, jumping 66 percent in the first nine months of 2017 compared with the same period the year before. However, the chance of being pursued by back-from-the-dead debt varies dramatically based on where you live. In several states zombie debts are running rampant, according to RewardExpert's research.

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1. Delaware is the zombie debt capital of the nation, with 44.72 complaints about zombie debt collectors for each 100,000 residents. The most complaints are against Synchrony Financial (SYF), which specializes in issuing private-label credit cards for companies such as Amazon (AMZN), Walmart (WMT), Lowes (LOW) and JCPenny (JCP); and Encore Capital Group (ECPG), which was recently cited in another RewardExpert report for discriminatory and deceptive lending practices. Synchrony didn't respond to requests for comment. Officials at Encore said they hadn't had an opportunity to review the study, so they could not comment.

2. Florida logs 42.43 debt collection complaints per 100,000 residents. Encore Capital is, again, one of the primary offenders, according to RewardExpert. "We see significantly higher per-capita reports of attempts to collect out-of-statute, paid or unverifiable debts in the demographically younger and more diverse metro areas, such as Miami, Jacksonville and Tampa, where the complaint rate adds to 56 complaints per 100,000 residents," said Tepper. "This is affecting disproportionately lower-income and minority individuals, who are already hurting."

3. Georgia comes in third with 42.42 zombie debt complaints per 100,000 residents. Encore Capital Group and Enhanced Recovery Co., better known as ERC, are the biggest offenders, said RewardExpert. (Nationwide, these are the two companies most likely to be hounding you about zombie debts, according to RewardExpert's research.) However, complaints are even more concentrated in urban areas in Georgia than they are in Florida. Residents of Atlanta logged 75 complaints per 100,000 residents, versus about 11 complaints per 100,000 in more rural areas of the state. Enhanced Recovery couldn't be reached for a comment.

4. Nevada logs 39.99 complaints per 10,000 residents, with Las Vegas and Reno being the state's zombie-debt capitals. Notably, identity theft is the cause of a number of the zombie debt complaints here, according to Tepper. Encore Capital and ERC were again the most complained about collectors in this state.

5. Maryland has almost as many zombies per capita as Nevada, with 38.65 complaints per 100,000 residents. Encore Capital and ERC were the most complained about collectors.

If you're contacted about a long-forgotten debt, it's important to be careful about what you say and do, said Tepper. In some cases, "acknowledging" that the debt might be yours could start the clock ticking all over again on debt collection statutes of limitation, formally bringing this once-dead debt back to life. 

Although debt collectors will badger you to admit the debt is yours, say only that you want their mailing address, Tepper said. Then mail a written dispute, demanding verification of the debt. The collector is required by the Fair Debt Collection Practices Act to provide that within 30 days. 

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That may be the last you'll hear about the zombie debt because chances are good that the debt collector doesn't have proof, said Tepper. Often when debt is sold, it doesn't have the requisite documentation that's legally necessary to collect. 

If the company does provide verification, check it for discrepancies. Is the debt really yours? Is it the amount that you owe or owed? Was the debt repaid, settled or discharged in bankruptcy? Has the statute of limitations (which generally ranges from three to seven years from the last payment) expired, making the debt uncollectible? 

If so, write the collection company again (you can use this nice sample letter) to notify it that the debt isn't collectible and you want the company to leave you alone. 

Make sure you keep copies of all of this written communication, Tepper advised. You'll need it if the collection collection attempts to take you to court. And even after the debt is settled, keep the information in a file. You may need it later because zombie debts have a tendency rise again.

"If the debt is resold, you could end up having to do this again," Tepper said. But if you have the documentation from the previous attempt, responding to each successive one should be a breeze.

Finally, if a collector sues you, make sure to respond to the court. Most cases are won by default, said Tepper. Respond in writing to the court with the statement that you don't recognize or acknowledge the validity of the debt in question and that you demand documentary evidence. 

Once again, because the paper trail accompanying zombie debts is often scant, asking for proof required by the Fair Debt Collection Practices Act often triggers dismissal of the case. However, if you simply don't respond to a court notice or summons, you could end up required to pay this zombie debt because you lost by default.

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