Posted: Contributor | April 25, 2014


What Is Phantom Debt? Debt Collectors Could Chase You for Debt You Don't Owe


If you have debt, you know how scary a specter it is. Amounts that you owe from mortgages, student loans, or overdue credit card bills can be rather intimidating. However, phantom debt is an altogether different kind of debt that can cause you to lose sleep. What is phantom debt, and what's so intimidating about it? Here's what you need to know about phantom debt if collectors are making your life a nightmare.

The Phantom Is There, Inside Your Mind

Phantom debt is a debt that doesn't actually exist; it's a debt that you don't owe. A phantom debt is any debt that is mistakenly attributed to a consumer or is so old that the consumer is no longer responsible for it. It is also called zombie debt, so named for the fact that it has no substance or is a dead debt that still chases you. It is a little-known fact that debts expire; depending on your home state, debt collectors may not be able to collect on a debt that is outside the statute of limitations, or they can try to collect but they cannot file a lawsuit against you. This is one way in which phantom debts are born. They can also originate if the debt collector illegally reports a paid debt as still owing, assigns you a debt that someone else accumulated, or fabricates a debt when in truth you owe nothing. In all cases, the debt has no substance, significance, or legal weight to it-it is a phantom.

Consumer Protection Under the FDCPA

The Fair Debt Collection Practices Act is a piece of legislation that dictates how debt collectors can and cannot operate their businesses. This includes anti-harassment measures and restrictions on how and when a debt collector may contact you. Under Section 807 of the FDCPA, it is illegal for a debt collector to knowingly threaten, deceive, or mislead consumers during the course of collecting a debt or to otherwise hide relevant information. That means it is illegal for debt collectors to knowingly pursue you for a phantom debt.

What to Do When Phantom Debt Haunts You

If a debt collector is pursuing you regarding a phantom debt, you have options. Your first course of action should be to send the debt collector a letter of dispute. You must dispute the debt in writing within 30 days of when the collector first contacted you. After receiving your letter of dispute, the debt collector must either provide you with evidence proving the debt exists and is yours or stop contacting you. In the event that you know the debt is fraudulent, you may send a cease and desist letter. After sending such a letter, the debt collector has one final opportunity to communicate with you. In this final communication, they can tell you one of three things: either that they will stop attempting to collect the debt, that they might possibly take legal action against you, or that they will definitely take legal action against you. This is the last time they are permitted to contact you unless they decide to take you to court.

If you send your debt collector a cease and desist letter and they refuse to back down, you should report the debt collector to the FTC, the Better Business Bureau, and the Attorney General in your state. You also have the option of suing the debt collector for both incurred and punitive damages.

Phantom debt can be intimidating, especially if you're receiving harassing phone calls from debt collectors, but this kind of debt doesn't exist. When a debt collector is pursuing you for a debt that isn't yours, you are under no obligation to pay anything. Consumer protection laws in the realm of debt collection put you in a powerful position when dealing with unscrupulous debt collectors, and it's important that you use that power. If debt collectors are haunting you, exorcise your phantom debts by reporting the collector to the FTC. Don't let collectors extort you out of your hard-earned money.

Learn more about the companies we review on the BDC Home Page.


Top of Page keyboard_arrow_right

author image

Written by Contributor

Our goal, here at Best Company, is to provide you with honest, reliable information you need to find companies you can trust.

Compare the top ranked companies

Find the right company for you.