What is zombie debt?

If collectors come calling, know your rights and don’t rush to pay

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Dealing with debt repayment is never easy, but if old debts come back to “haunt” you, the implications may be even worse than normal. You may receive phone calls from debt collection agencies regarding “zombie debt” that they’re trying to get you to pay.

Unfortunately, even if you’ve settled your debt or the statute of limitations has passed, that may not stop collectors from targeting you. Zombie debt is a term used to describe old debts or debts that you may not be responsible for paying. Knowing your rights is key to avoiding costly mistakes.

Key insights

Zombie debt refers to old or expired debt or even debt that doesn’t belong to you.

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Even if you’ve settled a debt, collectors may try to bring it back and convince you to pay.

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You should not send any payment for zombie debt without written debt validation.

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Paying or even admitting an old debt is yours could reset the statute of limitations.

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Understanding zombie debt

Zombie debt is any type of debt that the original creditor isn’t trying to collect anymore, but that doesn’t always mean it goes away completely. As Joe Camberato, CEO of NationalBusinessCapital.com, said, “Zombie debt is essentially old debt that comes back to haunt you.” Debt collections agencies may still try to take advantage of borrowers who are unaware of their rights.

Some types of zombie debt include:

  • Debts that may have shown up on your credit report, but have fallen off after the typical seven years.
  • Discharged debts, which were once legally your debt but have been discharged from your record, as may happen with some bankruptcy debts.
  • Settled debts, where you have paid an agreed-upon amount to the original creditor in exchange for written notification that your obligation is completed.

Collections agencies purchase outstanding debts from the original creditors, often for pennies on the dollar. This may be because the statute of limitations for collecting on that debt has passed or the creditor decided not to pursue enforcing repayment, but collectors buy those debts at a bargain, hoping to make a profit with whatever consumers are willing to pay.

The Consumer Financial Protection Bureau (CFPB) has warned consumers about zombie mortgages, in which homeowners have believed their mortgage debt to be either forgiven or satisfied, only to receive pushy debt collections notifications.

How does zombie debt come to life?

Although your original creditor may not even be the one trying to get you to pay, you still need to pay attention. The term “zombie debt” is quite accurate: Your debt may seem dead and gone, but debt buyers manage to resurrect it and attack you with it. A settled or discharged debt, one that has fallen off your credit report and one that isn’t even yours to begin with may all be forms of zombie debt.

Debt collectors find old debts to purchase for much less than the original amount, then go after the original borrower to get them to pay. They’re known for utilizing scare tactics like threatening legal action, even if they have no right to sue you for payment.

It’s not just a cute term, however. Debt collectors won’t call it zombie debt — they’ll aim to convince you that you’re in trouble if you don’t pay. And in many cases, sending any amount of payment or even acknowledging the debt could reactivate the debt. For example, in the case of a debt no longer listed on your credit report, paying anything will reset the clock, putting you on the hook for the entire debt for another seven years.

» MORE: Best Credit Report Sites

How to prevent zombie debt

Anytime debt is involved, it’s crucial to be vigilant and to know your rights. Following a few financial habits can help you avoid becoming a target of collectors.

Monitor your credit report

A good baseline habit is to keep an eye on your credit report from all three major credit reporting bureaus. It’s relatively easy to check your credit score using AnnualCreditReport.com.

Paying attention to all financial accounts including credit cards is also essential. You can watch for any unauthorized transactions or loans, and many credit cards also provide a free credit score check either from FICO or VantageScore. Use a reputable credit report site to monitor your credit as well, and take action if anything shows up unexpectedly.

Pay debts promptly

Paying off loans and other debts according to the loan agreement is also good financial practice. You can’t necessarily prevent zombie debt this way, but you can ensure you’re submitting payments on time.

Keep careful financial records

Maintaining good financial records can also serve you in case someone comes calling for zombie debt payments. Keep a copy of written documentation whenever you pay off a debt or strike a settlement with a creditor. Camberato noted, “Be sure to get any settlement offers in writing, confirming that payment of the agreed-upon amount will fully satisfy the debt."

» MORE: Debt avalanche method: pros and cons

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    Can I ignore zombie debt?

    If you’re facing zombie debt and collectors are calling, ignoring the issue won’t solve it. You should request debt validation or check your financial records to determine whether you’ve already paid the debt. If it’s past the statute of limitations, you need to contact the collections agency to demand it stop contacting you about the debt.

    What are the types of zombie debt?

    Types of zombie debt include debts that have fallen off your credit report as well as settled and discharged debts. Time-barred debts, or those that are past the statute of limitations for legal action, are also zombie debts. You may even face zombie debt for a debt that isn’t yours due to a stolen identity or a clerical error.

    Which debt dies with you?

    Certain types of debt are discharged upon the borrower’s death. These include most unsecured debts, such as credit card debt. However, shared debts, such as a mortgage with both spouses on the deed, pass to the surviving spouse.

    Bottom line

    Unlike fictional zombies, zombie debt can be a very real threat to financial security. You need to be aware of your financial picture and always question any notification from collections agencies before sending any payment. If someone tries to get you to pay on a time-barred debt or other form of zombie debt, know your rights and don’t allow yourself to be bullied into payment you don’t owe.

    Article sources

    ConsumerAffairs writers primarily rely on government data, industry experts and original research from other reputable publications to inform their work. Specific sources for this article include:

    1. Consumer Financial Protection Bureau, “Can debt collectors collect a debt that’s several years old?” Accessed March 1, 2024.
    2. Consumer Financial Protection Bureau, “What information does a debt collector have to give me about a debt they’re trying to collect from me?” Accessed March 1, 2024.
    3. Consumer Financial Protection Bureau, “Zombie second mortgages: When collectors come for long forgotten home loans.” Accessed March 1, 2024.
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