Phantom debt
Encyclopedia
Phantom debt or zombie debt is debt that is not legally owed, but that is somehow haunting the presumed debtor. It generally refers to debt that was never owed, was owed by a deceased parent, or that was previously owed by the presumed debtor, but was previously paid in full, settled, discharged via bankruptcy
or a dismissed court case, is beyond the statute of limitations
, or is otherwise not legally collectible, but that a collection agency
or other similar service is aggressively attempting to collect, often fraudulently.
While the concept of phantom debt is quite old, it has gotten a lot of attention since the 1990s.
Very often, collectors of phantom debt use intimidating, abusive, or otherwise illegal tactics in an attempt to collect phantom debt that include frequent phone calls, calls to the victim's place of employment, or threats of scary consequences against the victim that sometimes include arrest and/or criminal prosecution. In the United States
, such tactics violate the Fair Debt Collection Practices Act
.
Sometimes, the source of phantom debt is from collectors who buy the debt from other collectors for pennies on the dollar, then take action that is not always legal in order to collect it. Techniques used include suing or threatening to sue, reaging it on the victim's credit report, or promising to remove a negative credit mark in exchange for a partial payment. When the latter occurs, the agency will often not follow through, and will re-sell the debt to another similar agency that will engage in the same practices.
Bankruptcy
Bankruptcy is a legal status of an insolvent person or an organisation, that is, one that cannot repay the debts owed to creditors. In most jurisdictions bankruptcy is imposed by a court order, often initiated by the debtor....
or a dismissed court case, is beyond the statute of limitations
Statute of limitations
A statute of limitations is an enactment in a common law legal system that sets the maximum time after an event that legal proceedings based on that event may be initiated...
, or is otherwise not legally collectible, but that a collection agency
Collection agency
A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed....
or other similar service is aggressively attempting to collect, often fraudulently.
While the concept of phantom debt is quite old, it has gotten a lot of attention since the 1990s.
Very often, collectors of phantom debt use intimidating, abusive, or otherwise illegal tactics in an attempt to collect phantom debt that include frequent phone calls, calls to the victim's place of employment, or threats of scary consequences against the victim that sometimes include arrest and/or criminal prosecution. In the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, such tactics violate the Fair Debt Collection Practices Act
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act , et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act...
.
Sometimes, the source of phantom debt is from collectors who buy the debt from other collectors for pennies on the dollar, then take action that is not always legal in order to collect it. Techniques used include suing or threatening to sue, reaging it on the victim's credit report, or promising to remove a negative credit mark in exchange for a partial payment. When the latter occurs, the agency will often not follow through, and will re-sell the debt to another similar agency that will engage in the same practices.