Junk debt, sometimes known as zombie debt, is debt that has been sold multiple times. Often the debt is bought for pennies on the dollar and then the buyer of debt tries to collect 100 cents on the dollar and often attorney’s fees and interest on top of the actual debt. The practice can be highly profitable. The owner of the debt just needs to be able to collect periodically. Often this means being aggressive in collection efforts and doing it on a mass scale.
The debt that is selling for pennies on the dollar generally has some problems with it. The original debt collector has been unable to collect on it. Once the debt has been sold one or more times, it generally accumulates some new problems. These problems often make the debt legally unenforceable. Often these issues never get raised and the debt gets collected.
The problems are pretty basic and almost certainly anyone well acquainted with the collection of such debts is aware of them. The debtor though is often not and often the debtor is unable to afford an attorney even though it would likely totally change the dynamics of the situation.
The Typical problems are:
A. The debt buyer and sometimes even the original creditor cannot prove the debt. They just don’t have the evidence whether it be documentary evidence or witnesses. A civil defendant always has the right to make a plaintiff prove his case against him. This process is necessary to protect the integrity of the judicial system.
B. The statute of limitations may have expired. On credit card debt in Virginia, this is going to be either three or five years, depending on whether or not the debt is based on a written contract or not. People are supposed to get second chances unless they’ve done something like murder. There is no statute of limitations for murder.
C. The assignment may not be provable. You cannot collect on a debt that you do not own. When you are selling something for pennies on the dollar, details generally get overlooked.
D. The debt may be based off of inadmissible evidence, e.g. hearsay. Often it is hearsay within hearsay. Hearsay is generally not admissible in Court because it is considered unreliable. There are exceptions.
E. Someone has already sued the debtor for the debt and now someone is trying to take a new bite at the apple. This is called res judicata and it is not permitted.
The success of the debt collection industry is based on of people paying the debts without having full knowledge of the law and their rights. The industry makes a lot of money because the debt owner claims do not get tested in Court. If you want to pay debts that you don’t legally owe out of a sense of obligation, you should pay the original creditor.