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What you should do
If you find that you are being haunted by a “zombie debt, the first thing to do is never acknowledge that it's your debt, which means not saying anything that would even infer that you understand it's your debt. Second, be sure to watch out for the tricks played by scavenger collection agencies. For example for example, the collector might try a bait and switch credit card where they tack the old debt on to a new card that has offers great benefits.
Third, ask for everything in writing as proof that the debt is really yours. This could be the credit card agreement you originally signed plus your account history. If the collector cannot prove the debt is yours, it doesn't have the right to take any action against you
Failing this you will need to write a letter to the collection agency where you explain that you are not responsible for the debt, that you don't knowledge it and you demand that the collection agency stop harassing you or you will take legal action. And make sure you send it Certified and Return Receipt Requested.
However, if your credit report is being held hostage because the bank refuses to remove the debt until you pay up you really only have three choices. You can pay off the debt, hire an attorney to litigate the matter or simply ignore the problem and move on. What this really boils down to is that if you can't afford to hire a lawyer and if you need to have the debt removed from your credit report, you will have to pay off the debt – like it or not.
Think before you file
If you’re facing an insurmountable pile of debts the idea of filing for bankruptcy can be very appealing. Just think. In just a few months you could have all or most of your unsecured debts discharged and be completely debt free. Woo-hoo! But it's important to think before you act. Not even a bankruptcy can get rid of all debts. For example, it can do nothing about secured debt such as a home loan or auto loan. Unsecured debts like alimony, child support, spousal support and student loan debts also can’t be discharged through chapter 7 bankruptcies. So before you file, sit down and make a list of all your debts and divide them into two columns – those that can be discharged and those that can’t. Add up the two columns and this should give you a good idea as too much help you would get by filing for bankruptcy. And don't forget that some of those debts could turn into "zombies" and come back to haunt you years from now.