Let’s start from the beginning. A zombie debt, as the name suggests, is an old debt that people don’t usually remember; they just forget about it. That’s what happened to José Rivas, a home builder in Hayward, California. He was up to date on his first mortgage when a debt collector unexpectedly demanded payment on a second mortgage he had long forgotten about, the homeowner told Bloomberg.
The collection agencies then turn around and try to collect the entire debt from the consumer
These old debts are usually bought by collection agencies for pennies on the dollar. The collection agencies then turn around and try to collect the entire debt from the consumer. In this particular case, his second mortgage, which had become a recurring problem, came back to haunt him—an all-too-common occurrence that robs homeowners of their money and, out of fear, sometimes even their homes. Often, the collection agencies don’t have the legal right to collect the debt.
Maybe, the statute of limitations has expired, so the statutes and laws of each state come into play
The most common types of zombie debt are credit card debt or medical bills, but mortgages can also occur. In this case, in March, a company called Dyck-O’Neal foreclosed on Rivas’s home, claiming he was in default on a second loan of $121,000 he had taken out two decades earlier from New Century Mortgage, a company that no longer exists. Usually, a debt collector cannot sue you over zombie debt. The reason is that the statute of limitations has expired, so the statutes and laws of each state come into play.
Rivas last received a statement for his second mortgage, which was in default, in 2009, when he received a tax document informing him of the cancellation of his debt
According to official sources, if a debt has passed the statute of limitations, making a payment, or even verbally agreeing to make a payment, can reset the statute of limitations. In this particular case, Rivas last received a statement for his second mortgage, which was in default, in 2009, when he received a tax document informing him of the cancellation of his debt. If the zombie debt is legitimately his and the statute of limitations has not expired, it may be in his best interest to consider debt settlement. Upon returning from vacation, Rivas saw a notice of foreclosure on his door. As he told Bloomberg, he thought it was a scam and did nothing about it because he knew his first mortgage was current.
As property values rise, mortgage holders who bought these second mortgages are threatening foreclosures and other collection actions
It’s not uncommon for people to sometimes think of fraud as their first option, since there are several different forms of fraud in the United States, so it’s not unusual. However, a few months later, Rivas was informed that his house had been sold at auction due to foreclosure and that his family had to vacate, accumulating tens of thousands of dollars in legal expenses to keep their home. As property values rise, mortgage holders who bought these second mortgages (and their debt collectors) are threatening foreclosures and other collection actions. The fact is that months later, a legal document revealed that Rivas, the mortgage owner, “did nothing to pay off the arrears.”
In Rivas’s case, the man stated that the expenses related to his second mortgage, now a ghost property, have dashed his dream of paying it off and retiring. Most borrowers who sue over the unfair collection of these zombie mortgages, like Rivas, end up keeping their homes and avoiding inflated bills after providing evidence that debt collectors violated consumer protection regulations, according to official sources. Rivas’s situation is not unique. “I was trying to do everything right. And then this happens,” he said as he tries to settle his debts and get his finances in order.
