Have you ever received a phone call from a debt collector, or someone who claimed to be a lawyer, who tried to collect a debt that was six or seven or even ten years old? If so you might have been dealing with what are called “scavenger debt collectors.” These companies buy up old debts that are generally considered “noncollectable” from creditors for pennies on the dollar. Many scavenger debt collectors are notorious for using unethical, or even illegal, debt collection methods. Sometimes they will pose as law firms or use aggressive collection techniques, such as harassing you with repeated phone calls or even calling your neighbors.
Scavenger debt collectors may claim not to be bound by the auspices of the Fair Debt Collection Practices Act, but they are. And one of the laws they must adhere to is the statute of limitations on “time-barred debts.” If you are contacted by a scavenger debt collector, do not admit to the debt and do not agree to send them any money. Doing so may re-activate the debt file and extend your indebtedness for another seven to ten years.
If your creditor does take you to court and obtain a judgment against you, that is a different matter. Some states allow a creditor to renew a judgment a second time, which means they could pursue you indefinitely. If the judgment is obtained, your creditor can do several things to get money from you:
- Attach a lien to your property. This means that when you sell your property, you must pay the value of the judgment, with interest.
- Seize your bank accounts. You may go to the ATM and discover you can’t access your funds because, your creditor has levied a judgment against your bank account.
- Garnish your wages. Even if you have no property and no bank account, your creditor may legally take a percentage of your wages every week until the debt is payed off.
For this reason, it’s almost always better to negotiate with creditors and work out a settlement plan or try to reduced the payments before you are sued. While you may be tempted to take the phone off the hook and hide your head in the sand, this is the worst thing you can possibly do. Talk to your creditors and make arrangements to pay the money back; they’ll be happy to hear from you and your credit score will thank you too.