What is Zombie Debt & How to Slay It

Unpaid debts die slowly—and sometimes they’re brought back to life. 

When you first miss a payment, the original creditor contacts you and asks you to pay. But eventually, the lender writes off the original debt and sells it to a debt buyer, also called a debt collection agency, for less than the outstanding balance. The agency tries to collect the debt for a while, and then sells it to another debt buyer.

Years can go by as the debt changes hands, and you might think it’s gone. Then the phone calls start. 

How does zombie debt work?

A zombie debt is an old debt that a debt collector tries to collect payment on. 

These might be legitimate debts that have gone unpaid. Or, there could be a mistake, and you already settled the debt with a collector or discharged it in bankruptcy. Sometimes, the debt went unpaid because it was the result of identity theft. 

Zombie debts can be confusing precisely because you might not remember what happened. However, in spite of the name, these debts don’t need to be scary. 

Important timelines: credit reporting versus statute of limitations

Before digging deeper, let’s clarify one of the reasons that zombie debt can be so confusing—the timelines for credit reporting and the statute of limitations on debt.

  • Most negative marks fall off credit reports after seven years. The credit bureaus (Equifax, Experian, and TransUnion) remove most negative marks from your credit reports after seven years—the exception is Chapter 7 bankruptcies, which can stay for 10 years from the filing date. Collection accounts have to be removed seven years after the initial late payment that led to the account going to collections, even if the debt gets sold.
  • The statute of limitations restricts when someone can sue you. A creditor or debt collector can sue you to collect unpaid debt and, if they win, may be able to garnish—take money—out of your paycheck and bank account. Debt collectors might not be able to sue you once the statute of limitations is up. However, this can range from around three to 15 years, depending on the type of debt and state laws.

These two timelines are completely separate. A collection account might fall off your credit report and still be within the statute of limitations. Or, it might be time-barred (outside the statute of limitations) but still on your credit reports. 

Additionally, even if the debt isn’t impacting your credit scores and the debt collector can’t sue you, that doesn’t necessarily mean the debt is gone. In many states, debt collectors can still contact you about the debt. However, there might not be many repercussions to letting the debt remain unpaid. 

3 tactics zombie debt collectors use

Debt collectors who are trying to collect on zombie debts might use a few tricks and rarely offer any treats. 

  1. Ask for a small payment: The collector might ask you to make a small payment, agree to a payment plan, or respond with a letter acknowledging that you owe the debt. The trick—making a payment or acknowledging that you owe the debt might reset the statute of limitations.  
  2. Repeatedly contact you about the debt: Debt collectors can contact you by mail, phone, email, text message, and even via social media. However, it’s against the law for debt collectors to lie, harass you, or continue contacting you once you ask them to stop. 
  3. Illegally threaten you or file a lawsuit: In some situations, debt collectors can legally try to collect time-barred debts. However, it’s against the law for them to sue you or threaten to sue you to collect on the time-barred debt. 

Examples of zombie debt that collectors are after

Debt buyers often only receive a spreadsheet with basic information about debtors and accounts. Using these, they may start contacting people and trying to collect:

  • Second mortgages
  • Old debts that are near the statute of limitations
  • Debts that have fallen off your credit reports 
  • Time-barred debts
  • Settled debts
  • Debts that were discharged in bankruptcy
  • Unpaid debts resulting from identity fraud 

Some of these may be past-due debts that you want to settle or pay off if you’re in a better financial position. But you also want to make sure you protect yourself from illegal activity and illegitimate claims. 

How to protect yourself from zombie debt collectors

You can protect yourself from zombie debt collectors by learning about your rights, the statute of limitations, and holding strong when collectors contact you. Remember: 

  • Don’t immediately acknowledge the debt or make a payment. You don’t want to inadvertently restart the statute of limitations timeline.  
  • Ask the collector for more information. Debt collectors have to give you basic information about their organization and the debt they’re collecting. Additionally, you have 30 days from receiving the validation notice to ask for additional information about the original creditor.
  • Dispute debt that isn’t yours. You can dispute the debt if you don’t recognize it. But be sure to send the dispute within 30 days and consider using a certified letter with a return receipt so you’ll have proof that the collector received your letter. 
  • Tell the debt collector to stop contacting you. If the debt is off your credit report and outside the statute of limitations, you may want to send a written request to the collector asking them to stop contacting you about the debt. 
  • Don’t ignore notices of lawsuits. If the debt collector sues you and you don’t respond or show up in court, the collector may win a default judgment in its favor. 

The Federal Trade Commission (FTC) has a FAQ with more information about debt collection. And the Consumer Financial Protection Bureau (CFPB) has sample letters you can use as templates for communicating with debt collectors. 

How to prevent zombie debt

You can’t stop debt collectors from contacting you about a zombie debt, especially if you didn’t owe the debt in the first place or already settled or discharged it. However, if you think a debt collector is illegally harassing or threatening you, or continues contacting you after you sent a letter asking it to stop, you may want to contact a consumer rights attorney. Debt collectors who violate the Fair Debt Collection Practices Act (FDCPA) could have to pay you for the violations and additional damages.

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