What Is Zombie Debt?

What Is Zombie Debt?

What Is Zombie Debt?
Reading Time: 5 mins

Imagine getting a phone call out of the blue from a debt collector demanding payment for a debt from 20 years ago, or, even worse, a debt you’ve already paid; this sort of thing happens all the time, and it can be extremely unsettling when it happens to you. Fortunately, there are a few things you can do to tackle this “zombie debt,” and in this article, we will explain everything you need to know so that you can protect yourself if it ever happens to you. 

Everything You Need to Know About Zombie Debt

Debt that has exceeded the statute of limitations, was never yours in the first place, or has already been paid is what’s known as zombie debt. When this sort of debt shows up on your credit report, it can be extremely frustrating. 

What Is Zombie Debt? 

So, as mentioned, a zombie debt is a debt that has resurfaced seemingly from the dead. This can be any debt that has no business being on your credit report, such as debt that has surpassed the statute of limitations, debt that has already been paid, debt that was never yours to begin with, or any other debt for which you are not legally responsible.  

Debt collectors tend to pay as little as four cents on the dollar to buy this type of debt from the original creditor,so they have very little to lose. Even if they are only able to recuperate a small percentage of the original debt, they will likely profit from the endeavor,so they’re willing to try to collect despite the fact that this is both immoral and, in many cases, illegal. 

Let’s take a look at some of the most common types of zombie debt. 

What Is the Most Common Type of Zombie Debt?

In most regions, the statute of limitations for a debt is seven years; after this time has elapsed, you can no longer be sued for the amount owing, and it may or may not be legal for a debt collector to try and collect on this debt. Any debt that has exceeded the statute of limitations is known as time-barred debt; however, if you make any type of payment on this debt or even acknowledge the debt, the statute of limitations can be reset, and you can be taken to court for payment. 

Other common types of zombie debt include debts that were never yours to begin with, such as debts that were the result of fraud or identity theft, or debts that have already been paid in full or have otherwise already been settled with the original creditor or a collection agency.

What Tactics Do Zombie Debt Collectors Use?

Debt collectors who deal with zombie debt are often sneaky, manipulative, deceptive people who are more than happy to trick you into resetting the statute of limitations so they can pursue you legally to recuperate money that was impossible to collect otherwise. 

Some of the most common tactics used by zombie debt collectors include:

  • Asking you if you remember ever owing this debt so that they can reset the statute of limitations;
  • Asking you to make a small payment to settle the debt, such as a $20 payment knowing full well that if you do, they can reset the statute of limitations for the full amount;
  • Threatening to take legal action against you if you don’t pay the debt even though they know it’s not possible to do so;
  • Hounding you with harassing phone calls, letters, and emails;

How Does Zombie Debt Work?  

Basically, the way it works is that zombie debt collectors buy this old debt for pennies on the dollar with the intention of tricking you into acknowledging the debt so that they can reset the statute of limitations and try to collect the original amount owing plus many years of interest. 

The second you acknowledge the debt or make any payment towards it, you are once again on the hook for the original amount plus any interest that has accrued, which can be a substantial, even absurd, amount of money given the time frames involved with this type of debt. 

Does Zombie Debt Have an Impact on Credit Scores?

Given that zombie debt is not legally enforceable, it cannot negatively affect your credit rating. That said, if you acknowledge the debt or make any payment towards it, then it can once again appear on your credit report for another seven years, which means that it can, in theory, negatively impact your credit score, and it can potentially damage your credit score quite significantly, if not dealt with correctly.

Should You Pay Zombie Debt?

If the statute of limitations has been surpassed, then you should not in any way acknowledge that you owe, or ever owed, the debt. Simply state that you don’t recognize that debt. If the statute of limitations has not been surpassed, then you may want to consider making a settlement offer or otherwise seeking debt relief if you were unable to pay the amount owed.

If the debt was never yours and is the result of identity theft, then you may want to consider speaking with a credit counselor for assistance in dealing with the situation. Alternatively, you can submit a letter to the debt collection agency requesting that they cease all contact with you immediately, and by law, they are required to comply.

What to Do if You’re Contacted About Zombie Debt

So first and foremost, you need to identify what the debt is that they’re talking about. Suppose you remember the debt, but the statute of limitations has been exceeded. In that case, you should not under any circumstances acknowledge the debt offered to make any payment or recognize it in any way, shape, or form. 

Simply state that you don’t know what they’re talking about and leave it at that. If they continue contacting you, then you can write them a letter demanding that they cease and desist contacting you about this debt that you don’t recognize and by law they are legally required to oblige.  

If the statute of limitations has not been exceeded, you may want to consider seeking debt relief if you cannot financially meet the requirements to settle the debt. Alternatively, you can offer to settle the account for a smaller amount than was originally owed or is being requested; chances are that if the debt is set to expire soon, then the creditor would be willing to make a payment arrangement with you for an amount that is substantially lower than the original amount owed. 

In any event, it’s worth noting that any amount agreed upon for a settlement will still show up on your credit report and impact you negatively. Just because you pay a debt with a settlement offer, the payment has no bearing on your credit score and will still show up in collections as a debt paid in collections rather than a debt paid in full.

Final Thoughts

When zombie debt shows up on your credit score can be incredibly frustrating. Whether it’s debt that is no longer owed, was never owed, or is the result of fraud or identity theft, it’s important that you act quickly to resolve the situation. 

You can request more information about the debt from the debt collection agency, and they are required to provide this to you within five days of the first contact regarding the matter; if they neglect to provide you with more information about the amount being requested, then you can request that the debt be dissolved.  

Alternatively, if you know that the statute of limitations has been exceeded, then you can submit a letter to the collection agency demanding that they cease contacting you with regards to this matter, and they are legally required to do so; otherwise, they can get into legal trouble for harassing you. 

No matter what the case is, you should never acknowledge zombie debt. This is exactly what the zombie debt collection agency wants you to do so that they can reset the timer and pursue you legally to recuperate the amount once owed.

By acting quickly, you can have this sort of debt removed from your account again so that it no longer affects your credit score or your ability to access credit. The ball is in your court, and it is within your power to smash this sort of bad debt before it negatively impacts your financial circumstances or affects your life adversely in any way.

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