How to deal with old, recurring debts
In many ways, student loan are the gift to keep on giving. Although they are able to fund your college education and help you get a degree in the field, they often stay in your life for many decades.
Forbes reported recently that the current rate of arrears for arrears greater than 90 days is 11.4%. More than 1.3 million borrowers owe over six figures on student loan debts.
Many seniors struggle to repay student loans. Thousands of people are also able to benefit from income-based loan repayment plans which require payments for 20 to 25 year. It is a long time to repay any debt, other than the mortgage you own. Get more information from dedebt.com.
But what happens if student loans seem gone but then suddenly appear? A Zombie debt is any debt that has either expired or been paid off and then reappears.
How student loans are transformed into zombie debt
Most types debt have a statute that limits the amount of time creditors can sue you. Federal student loans used to have a reasonable limit of six year until 1991. However, that term was temporarily lifted in 1991 and federal student loan creditors could suddenly sue for their debts forever.
Private student loans must be repaid within the statute of limitations. This varies from state to state. The statute of limitations in most states for written loan agreements is 3 to 10 years.
Zombie debt may come into play in many different ways. First, creditors could sue for a loan that is not yet paid off. Some cases may not allow you to show that you have completely paid off the loan. This is especially true if the debt is more than a decade old.
Although a creditor may not be allowed to sue for debt collection, it doesn’t necessarily mean that he won’t try. Many times, a new lender will buy back old debts in exchange for a small portion of the amount owed. They then use aggressive tactics and try to get your money. Although harassment of creditors is prohibited, some collection companies are able to push the boundaries.
How to manage Zombie Student Debt
Your best option depends on the type of student loan you have. While the tips below may not work for you, it is something to consider.
Take advantage of federal loans to get started
Federal student loans don’t expire. You should not ignore them. If you don’t sign up for the program or begin making payments in good conscience, the federal government can seize your wages. They may also request your tax returns and Social Security benefits.
It is possible to look into programs that will temporarily suspend your student loan payments. Another option is an income-based plan, which allows you to pay a certain percentage of your “discretionary” income for 20 to 25 year. You will not be able to repay your loans at the moment. However, you will have income tax to be paid on the amounts that were remitted.
If you are in default on student loans, you will need to consolidate or rehabilitate those loans.
Ask for proof of debt
Ask for documentation proving that your private student loans are owed if they have been revived by a creditor. Send a certified copy of your request for information. Include the original loan note and the name of your original creditor. The borrower’s name, the account number, the amount owed today and the payment history.
You should never acknowledge the debt nor accept that it is yours. Consumer Financial Protection Bureau has sample letters.
If the debt is not within the statute of limitations, the creditor can’t collect it.
Also, note:NotMake payment for student loan debts that are considered “zombie” and have not expired. This will “restart” the clock on your debt so it is no longer exempted from collection.
Take the initiative to pay off the debt
It is possible to settle for less if you have a student loan with a zombie lender. This is because creditors often buy these old debts at pennies a piece, so even a modest settlement amount from them could get them out.
Accept any settlement offer you receive that is reasonable and acceptable. You may need to review the written settlement offer once you have received it. This will ensure that there are no hidden “pitfalls” or omissions.
You can also request the deletion of the default from your credit report in return. This can improve your credit score, especially after you settle debt.
Contact a lawyer
You may want to consult a lawyer, regardless of what. A qualified professional can help to understand the limitations on your state’s debt and make an action plan that will get rid of it.
An experienced lawyer can help answer your questions, and guide you in the right direction.
This is mandatory if a lender is suing you for past debt. You have the option to handle the dispute yourself but this opens you up to a lot of possibilities. While a lawyer can be costly, it may be worthwhile.
Conclusion: keep your loan documents
Important to remember is that even after your loan is paid off, some zombie debts may still exist. This can occur due to an error in processing or administrative procedures, and nobody is immune.
You can avoid getting into a situation where you are in a state of zombie debt. Keep your documents, especially those for student loans, as well as any other loans. When you pay off any loan or debt, ensure you get a written statement that shows the $ 0 balance. Also keep this document safe.
If you are contacted by a creditor about a debt that needs to be repaid in future, you’ll need to have the required documents to prove it. If you lose your loan documents, you will need to show proof that you’ve paid your loan off. It can be challenging to pay off a loan when many years have passed.