What Is Zombie Debt and How To Prevent It From Plaguing You

When you hear the term “zombie debt,” your first thought might be a punny Halloween costume or a nerdy accounting theme party. Unfortunately, zombie debt isn’t much fun — but it’s still an important term to understand in case you’re ever pestered by debt collectors.

So, grab your metaphorical bats and shovels: here’s your guide to surviving a zombie debt outbreak.


What Is Zombie Debt and How Does It Work?

Zombie debt refers to a loan that is either very old and/or no longer owed. It often goes hand-in-hand with debt scavengers — collectors who purchase large amounts of debt from the original creditors (or even other collection agencies) for extremely low prices.

Debt scavengers will then hound the borrower for payment. Since debt buyers purchase old debt for a fraction of the cost, they don’t need much to make a profit. In that sense, they may request a reduced amount and frame it as a compromise.

For example, let's pretend you used a credit card to buy something, forgot about it and never paid it off. Ten years later, the original creditor writes off the outstanding balance as bad debt — meaning they don’t expect you to pay it. At that point, the creditor may sell the credit card debt to a debt collection agency. Now, the debt collection agency starts prodding you to repay some or all of your old balance. This is zombie debt.


The most common types of zombie debt

Not all debt becomes “zombified” for the same reason. Here are the most common types of zombie debt:

  • "Dead" debts that may still be on your credit report but are no longer enforceable because the statute of limitations has passed.
  • Debts that have fallen off of your credit report because they are past the credit reporting time limit. Remember though, just because a debt is no longer on your credit report does not mean that it is not enforceable.   
  • Debts that you've already settled or paid off.
  • Debts that were discharged in bankruptcy.
  • Debts that aren't your responsibility but are tied to your name because of identity theft or mistaken identity.


How Do I Get Rid of Zombie Debt?

As the name implies, zombie debt can be scary. No one likes getting sporadic phone calls from unknown numbers, much less debt collectors. But have no fear! Zombie debt can be defeated — here are a few ways to kick zombie debt back in the grave:

  1. Ask the debt collectors to stop contacting you. The Fair Debt Collection Practices Act (FDCPA) gives you the right to tell a debt collector to stop contacting you if they're dredging up zombie debt. You can send a certified letter to the debt collector with a return receipt to collect proof that it has been received by the debt collector. If the debt collector continues to contact you, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) or report the violation of the FDCPA to your state's attorney general office. You could even sue the debt collector in state or federal court.
  2. Send a debt validation letter. Debt collectors must prove that you actually owe money. By sending a debt validation letter to the collector, you can find out the original creditor, the amount owed and if it’s still valid.
  3. Dispute the debt. If you don't think the debt belongs to you, you can send a dispute letter to the zombie debt collector. Additionally, you can dispute the debt with TransUnion, Experian and Equifax if the debt is on your credit report.


What Is the Statute of Limitations on Zombie Debt?

If you're contacted by a debt collector about zombie debt, it's possible that the debt was sold because it was no longer legally enforceable. This happens when the statute of limitations has expired.

The statute of limitations is the amount of time debt collectors have to sue you and try to force you to pay a debt through court. Usually, the statute of limitations starts on the last day of account activity. So, if a borrower stopped making payments for a credit card, the statute of limitations would likely begin on the day of the last payment.

The statute of limitations varies depending on your state and the type of debt. You can contact your state attorney general’s office or search their website to find out the specific details that pertain to your situation.

It's important to be aware of the statute of limitations if you're contacted about zombie debt. If zombie debt is past the statute of limitations, you can’t be sued if you don't repay it. In some cases, acknowledging zombie debt or making a payment on it can reset the statute of limitations. If this happens, you'll be legally responsible for the debt again.


Do I Need to Pay Zombie Debt?

You do not have to pay zombie debt, even if a debt collector is asking you to.

If the zombie debt is on your credit report, it could impact your ability to get approved for things like mortgages and credit cards. This is why you should ensure the debt is actually yours. If it's not, you can dispute the debt and get it removed from your credit report so that it no longer affects your credit score.

If you confirm the debt is yours, that doesn’t mean you should pay it. If you make a payment, you could restart the statute of limitations. As a result, the debt collection agency could then sue you if you don't finish paying off the debt. If your zombie debt is no longer on your credit report, it’s not hurting your score.

The truth is that paying zombie debt can cause more problems than it solves. That's why if you're contacted about any debt, it's crucial to consider your options before responding to the debt collector. You should always validate that a debt belongs to you and that it falls within it’s statute of limitations before agreeing to any payment.



This content provided is for educational and informational purposes only and does not constitute financial or legal advice. RISE is not acting as a credit counseling or repair service, debt consolidation service, or credit services organization in providing this content. RISE makes no representation about the reliability or suitability of the information provided – any action you take based on this content is at your own risk.

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