Just like the phoenix that rises from the ashes, so does so-called zombie debt. A consumer may think it’s dead, but it keeps coming back to haunt them.

“Zombie debt is a phrase to describe all debt that a consumer had forgotten about or never even owed that comes back to haunt them,” said John Monderine, of Rapid Recovery Solution, Inc.

Joan Baker has been tormented for years as collection agencies hassled her about debt that was not even hers to begin with. More than a decade ago Baker was the victim of identity theft and since then debt collectors have not let her rest.

“It is a nightmare. It won’t go away,” Baker said. “I had knots in my stomach. I was on the phone for hours.”

Baker reported a fraudulent $5,000 charge and still the debt collectors were persistent. When she refused to pay, they went after her credit rating. Each time she cleared her name with one agency, the cycle started up again because her debt had been sold to a different debt collection company.

Baker finally reluctantly sued the aggressive collection agency for fraud five years ago. Baker was awarded $40,000.

Her experience isn’t an isolated one.

When Larry Randazzo missed a Verizon bill for 11 cents, it morphed into $4,000 seven years later.

Randazzo said the collector backed off when he made it clear that he knew his rights.

“If they are going after me, someone who has the resources to fight them, what are they doing to people who don’t understand their rights?” he said.

“I think what I did was make them aware that I was aware,” Randazzo said.

Most banks sell debt. For example, an institution might sell a credit-card debt worth $10,000 to a collection company for only $100. Then, the agency turns around and aggressively tries to collect and whatever it receives is mostly profit.

This year more than $100 billion of “junk debt” is expected to be bought and sold on the open market, according to a report by debt collection advisory Kaulkin Ginsberg. A debt collection trade association said it polices its members.

“Once we determine that the complaint is against a member of ACA International, what we do is seek to work with the consumer and the debt collection agency to identify a solution,” said Rozanne Andersen, executive vice president of the Association of Credit and Collection Professionals.

How to Protect Yourself

First, ask for something in writing.

Consumers should be aware of the statute of limitations in their state. Most allot about seven years where you cannot be sued or have your credit rating destroyed.

“If a consumer believes that this debt that the debt collector is trying to collect from is past the statute of limitations, they should not pay it,” said Mauro.

Also, you should never let a collector debit your account because the money can often be difficult to get back.

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If the person in debt agrees to pay, the bill collector will record this commitment and will check up later to make sure that the payment was made. If a debtor does not pay, the collector will prepare a statement about their delinquency for the credit department of whoever they work for. In extreme cases, collectors may call for repossession, hand over the account to an attorney or disconnect service.

Collectors must be careful to abide by the Federal and State laws that apply because people’s financial problems are sometimes a sensitive issue. The Federal Trade Commission says that a collector has to positively identify the person who owes money before they can announce that the purpose of the call is to collect debt.

The bill collector will then issue a statement, sometimes called a “mini-Miranda” that lets the customer know that they are a collector.

Collectors also have to follow the state laws that state how they must proceed. A lot of companies use electronic systems now to help bill collectors remember all of the laws and regulations regarding each call.

Collectors utilize computers and an assortment of automated systems in their jobs. Companies will keep track of their accounts by using computers, and collectors are able to keep track of collection attempts in the past and other information in notes on the computer. Like most call centers collectors use headsets in lieu of regular phones. Automatic dialing allows bill collectors to work quickly and efficiently with no chance of dialing the wrong number. Typically, in house bill and account collectors work in an office environment, people who work for a third party agency might work in a call center type environment.

The work has the capacity to be stressful; people get confrontational when they are asked about their debts. The best collectors have to face rejection regularly, but still be ready to make their next call in a positive voice. Fortunately for them, some customers appreciate help in resolving their debts.

Rapid Recovery Solution is a commercial debt collection company.

You should call in a credit collection agency sooner rather than later. The longer you wait to begin the collection process on past due accounts, the less of a chance you’ll have at recovering your money.

The day after an account becomes overdue, you should place a polite phone call to the customer who owes you money. If that doesn’t work, you may want to send a few past-due letters yourself, or you may want to go directly to a credit collection agency. Base your decision on how much money is owed to you and the history of your relationship with the customer. If it’s the first time you are doing business with them, you’ll want to call in a credit collection agency earlier than you would with a 10-year customer with a solid credit history.

Most companies call in a credit collection agency once a debt is 60 days to 90 days past due. If you wait much longer than 90 days to begin recovering unpaid receivables, your chance of collecting drops dramatically.

If you discover that your account has gone out of business, find out what type of business it was – a corporation, a partnership, or a proprietorship. If it was a corporation, don’t bother calling for the help of a collection agency. It is doubtful that you, or any one else, will be able to squeeze the last few nickels out of that client. If the company is a partnership or a proprietorship, you may be able to get the individual owners of the company to pay you out of their own pockets.

If you try to recover an account and fail, consider that loss a tax-deductible item (Tax Code IRC 166, Reg. 1.166). You will be able to deduct the cost of the goods sold (but not paid for) as an ordinary business expense. You can’t deduct any lost profits from the sale, nor can you deduct the money owed for services rendered.

Rapid Recovery Solution is a New York debt collection company. Click here to get your own unique version of this article with free reprint rights.