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Debt You Didn’t Even Know You Had

Apr 7, 2021 | Personal Finance

For the most part, you know where the money goes each month, and one of the things you can just about count on is continuing debt, such as a bank loan for a new home, a new car, or even college tuition. 

This isn’t necessarily bad, since this is often the only way most people can afford the big-ticket items, and you know how much and for how long the payments will be.  

But some debts can blindside you, such as medical. Even if you have insurance, you probably don’t know exactly what all that will cover, and you may find yourself on the hook for some out of network charges. But the good news is, you can ask FAIR Health, a national non-profit group that advocates for lower costs. For that matter, you can also talk to your hospital’s billing office and negotiate a payment plan or possibly even  financial assistance, but don’t put it off. This can lead to higher bills due to late fees, and it can do some damage to your credit score. 

If you drive a car, you’re going to have car trouble at some point, and  sometimes that trouble can come in the form of a costly repair bill. You can take early steps to keep the cost down by having regular preventative maintenance done on your car, but if you do have to have repairs, shop around for a trustworthy garage before you commit. You may want to  check the garage’s online ratings or even ask some friends where they 

For all the convenience of autopay — you can just set it up to debit your account to pay your recurring bills on the same day every month — things can go wrong. Sometimes, the payment may not go through or you haven’t properly enrolled. You may not be making your monthly payment and not even realize it until you’ve run up some hefty late fees. 

 It’s always a good idea to check your autopay from time to time. If this worries you and you decide to do away with autopay, you can set up an autoreminder with your bank in the form of emails that  warn you when the payment date of any bill is coming near. 

Although zombie debt sounds like it should be a really good, scary movie, it’s unfortunately a really scary thing that happens to a lot of people.  Zombie debt is a debt that comes back from the dead to take a bite out of your wallet (and possibly credit score). It’s a dormant debt that’s resurrected by a bill collector or even by you making a payment on your old debt. Creditors will often remove old debts from their books and sell them to debt collectors for pennies on the dollar. Even if they only collect a portion of what you owe, it’s still a profit for them. 

There are several sources for zombie debt, such as debts you’d actually forgotten, debts that you’d already settled with your creditor — perhaps they agreed to a lesser sum if you paid it off in one or two payments instead of a period of months or even years — charges from identity theft, debts wiped out by bankruptcy, or  debts that have already passed the statute of limitations. 

The problem is, it’s hard to tell when an old debt is legitimate, and the information tends to get muddy as debts are sold and resold and high-pressure collection tactics are brought into play. 

But there are ways to fight it, and the first thing you’ll want to do is gather as much information as possible before you make a decision. That means no matter how much pressure a collector may put on you during a phone call, don’t agree to anything. Instead, insist upon a validation letter. This will outline the original amount, the original creditor, and how to challenge it. This will also help confirm whether the original debt has already been paid off, or if it’s past the statute of limitations (that doesn’t mean a debt collector still won’t try). 

Once you have the information and you see you actually have paid off the debt, write a letter to the collection agency demanding they cease contact. The Fair Debt Collections Practices Act requires that they do so. 

If it’s not your debt, write a letter stating that within the first 30 days of contact. 

If it is your debt and can pay, do it. Set up a payment plan and get it over with. This can give your credit score a bump upward once it’s all behind you. 

 But whatever you do, get everything in writing. 

The information provided is for informational purposes only and is not a substitute for professional financial advice. You should consult a credit counseling professional concerning the information provided and what should work best in your financial situation. And any action on your part in response to the information provided is at your discretion.

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