What is Zombie Debt? Keep Debt Collectors from Raising Dead Debt to Haunt Your Credit

Modern debt is higher than it’s ever been, and with the increase in bad loans and credit card debt comes a corresponding rise in zombie debt. Many consumers find themselves hounded by debt collectors for old debts such as payday loans no credit check they thought were long gone.

What is Zombie Debt?

‘Zombie debt’ is debt that might as well be back from the grave. Old unpaid debts are often sold by credit card companies (and other lenders) to debt collection agencies for bargain prices – sometimes for as little as 1 to 3 cents for every dollar of debt that is owed. Then these collections agencies go to work, hounding creditors in ways that can be offensive, threatening, and even illegal.

Debt collectors purchased as much as $110 billion dollars in delinquent debt in 2015, for prices ranging from 1 to 12 cents per dollar. And in 2015, the U.S. Federal Trade Commission received 66,627 complaints about the practices of third party debt collection agencies for their offensive and underhanded attempts to collect on zombie debt.

Where Does Zombie Debt Come From?

Zombie debt can come from many sources:

  • unpaid debts
  • debts that were paid off years ago
  • debt that has been negotiated or settled
  • debt included in a previous bankruptcy that has been legally erased
  • loans that were never yours (i.e. bank error)
  • debt accrued by someone else via identity theft

Whatever the source, zombie debt can be irritating, frustrating, and difficult to get rid of, but there are effective ways to deal with zombie debt.

How to Get Rid of Zombie Debt

First and foremost, don’t acknowledge the debt to collectors. Even admitting the debt was yours can be enough for collectors to reactivate old debts – which not only means the debt will have to be paid (no matter how old it is) but can also damage a good credit score.

Check the statute of limitations on debt. Debts cannot be pursued after a certain amount of time has elapsed. The statute of limitations will differ from state to state, but the statute that applies is the one for the state in which the creditor presently lives.

Debts disappear off of credit ratings after 7 years (10 years if bankruptcy is declared), but zombie debt collectors can reopen old debts and sometimes even falsify the dates on which a payment was last made on the debt, extending its life. This is illegal, as is threatening to sue or suing for a debt that has expired according to the statute of limitations.

Don’t agree to anything unless the collection agency is willing to make the agreement in writing. Zombie debt collectors are famous for offering deals and settlements, only to pursue lawsuits once they have a payment that reopens the debt.

Some debt experts even recommend hanging up on zombie debt collectors – especially if the debt is over 7 years old, has already been paid, or is due to identity theft. Certainly, if debt collectors become offensive, there’s no reason to stay on the phone and take the abuse over a debt that has already been paid off or legally erased.