What you need to know about zombie debt


Zombie debt is debt that has been “raised from the dead”, so to speak. It might even be something you never owed at all.

When a person does not pay a debt, the lender will take action – by phone, letter, or even through legal proceedings – to collect the money owed to them. In some cases, however, the debtor simply cannot pay or cannot be found. In other cases, the debtor files for bankruptcy and, depending on the type of debt, the debt can be suspended, renegotiated or paid off completely.

Sometimes that old debt comes back to life. Some of the most common zombie debt scenarios are as follows:

  • Unpaid debts that exceed the statute of limitations when you can be sued for payment
  • Unpaid debts you owe but forgot
  • Unpaid debts wiped out by bankruptcy
  • Debts you have already paid with the creditor
  • Fraudulent charges of identity theft
  • Fake Debt That “Creditors” Say You owe in a Scam

How does debt come back to life?

Creditors often remove old debts from their ledgers and sell them to third party collectors. In some cases, debts are legitimate, but in others, they are not. When debts are sold and resold, records may be incomplete or inaccurate. Think of it as a “phone” game. The more a debt is transmitted, the more likely it is that the associated information is incorrect.

When debt collectors call

The legal treatment of old debts will depend on where you live and the type of debt in question. By law, debt collectors are not allowed to sue for old debts if the statute of limitations has expired, however, they are still allowed to contact you and request repayment of the old debt. Check the statute of limitations for every American state and Canadian Province for more information.

However, if you start making payments or acknowledging the debt in some way, the action may restore the collection agency’s legal right to take the matter to court. Never agree to pay a debt you are unsure of, even if the collection agency is pushing for payment.

The best way to start is to do a thorough investigation. Search old records to find bank statements and payment advice. Gather as much facts as you can about the debt in question. Then, within 35 days of first contact and without acknowledging that the debt is yours, ask the creditor for a debt validation letter. The Fair Debt Collection Practices Act (FDCPA) requires that the collection agency provide you with written proof of the validity of the debt or a judgment against you, as well as the name and address of the original creditor if the debt has been resold. Once you have gathered this information, determine if the debt is really yours and if it still needs to be paid.

If you determine that the debt was yours, but you have already paid it, write a letter to the collection agency and ask them to stop all contact. Include proof of payment if available. The collection agency is legally bound to stop contacting you under the FDCPA.

If you determine that the debt is not yours or is invalid, write a letter contesting its validity and, if applicable, include any evidence you may have.

If you determine that you owe the funds and can pay the debt, resolve the issue by first getting a written payment agreement, and then clearing your unresolved debt.

If you determine that you owe the funds but cannot pay the debt, you can seek debt relief through bankruptcy or credit counseling.

When deciding which way to go, keep in mind that once a debt has passed the statute of limitations, collectors can no longer sue you for payment. Additionally, the FDCPA states that all unpaid debts must be removed from a person’s credit rating after seven years. If you decide to start paying or pay off an old debt in full, it could jumpstart the statute of limitations and affect your credit.

For more information

If you need to contact a collection agency to dispute a debt, request a debt validation letter, or ask the collection agency to stop contacting, use these models on Consumer.gov.

Keep in mind that although most debt collection agencies are legitimate, there may be times when a scammer will seek information through phishing. For more information on how to avoid this diet, visit BBB.org/Avoid Scams. If you’ve been the target of a debt collection scam, be sure to report it to BBB.org/ScamTracker.

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