Phantom Debt Explained
So what is phantom debt, how can it hurt you, and how do you get rid of it? A great article from CNBC came out this week about phantom debt starting to raise its ugly head. Phantom debt is a term that’s assigned to loans, obligations, or debts that happened before that have long since been considered dormant or sometimes considered gone, and now they’re popping back up.
Historical Context
Remember back in 2008 there was a financial crisis. That crisis lasted 2 or 3 years from about 2007 to 2010. Many people had foreclosures, had repossessions, had judgments, had all kinds of claims against them, liens against them during that time. Well, that was 15 years ago at this point, right? A lot of people thought, well, after 15 years I don’t have to worry about it. Well, now that the economy’s gotten better, there’s been some inflation, a lot of these debts were sold to private collection agencies for pennies on the dollar almost nothing and they just sat on them. They didn’t have to do anything, and now they’re popping up and saying now this debt is good. They’re starting to pursue people, they’re starting to contact people, they’re starting to maybe try to claim assets, and it’s surprising a lot of people that thought, well, since I didn’t hear from anybody for so long, I thought this debt was gone.
Legal Considerations
Sometimes debts do go away after a certain statutory period of time. Sometimes people think 7 years or 10 years, but lien holders can do things to extend it. They can put another filing on or do some activity that extends that deadline.
Actions to Take
So what do you do if you do have any debt? Even if you haven’t heard from debt collectors, you may want to look at filing for a lien release, and there are different ways you can do that. You can send out notices to the lien holders, you can file with the court for a court-ordered lien release. Again, we’re not attorneys giving you legal advice, but if you are worried about some prior debt that you’re not sure whether or not it’s still valid, don’t go by your credit report. Your credit report may have it; it may have fallen off but it doesn’t necessarily mean that it’s no longer valid. You may want to look at ways to formally take it off of any obligation. Whether it’s a car loan, maybe you clear it off the title. If it’s a real estate mortgage or lien, you want to take it off your property. First, you have to find out if it’s there, and you can do title searches on real estate or vehicles, and you can check out our website for those. Then you might want to file paperwork to remove that from the asset using a lien release request process, and our website will describe that in a little more detail as well.
Protecting Yourself
Phantom debts are starting to pop up. If you are a victim of a phantom debt now claiming against you, you may want to see if it’s something that you want to take proactive measures to make sure it doesn’t affect your future on buying a car, a house, or reappearing on your credit and lowering your credit score or costing you money.
