What Is Zombie Debt?

What Is Zombie Debt?

Zombie debt is debt that wasn't previously on your radar, but that a company contacts you and says you owe. It comes in many forms, including:

• Time-barred debt: States have statutes of limitations on debt collection, which limit the period in which you can be sued for payment. For most types of debt, the statute of limitations is three to six years, depending on where you live. But even if debt collectors can no longer take legal action against you for time-barred debt, in most states they can still contact you to collect it.
• Settled or paid debt that resurfaces: Debt collectors may also buy old debt you settled with, or that was canceled by, the original creditor. They'll attempt to collect on the amount of the original debt that's outstanding and take whatever you agree to pay. They may even resurrect debt you paid off and that had already come off your credit report.
• Debt discharged in bankruptcy: A debt collector may also try to get you to pay debt that's canceled, or discharged, when you declare bankruptcy. Types of debt eligible for bankruptcy discharge include unpaid credit cards, personal loans and utility bills.
• Debt mistakenly attributed to you: It's also possible the debt doesn't belong to you at all, and that a debt collector believes it's yours due to an administrative error, such as a misspelling of your name.
• Debt affected by identity theft: If you've been the victim of identity theft, you may be notified of zombie debt that isn't even yours. For example, if a thief stole your personal data and opened credit accounts in your name without your knowledge, debt collectors may seek payment from you.

Learn more: How Does Debt Collection Work?

How Zombie Debt Works

Zombie debt may arise when:

• Creditors sell debt to collectors and accidentally include resolved debts
• Debt collectors try to get payment for outstanding or settled debt they purchase from creditors or other collection agencies
• An error or fraud results in attempts to collect on debt you don't owe
• Debt collectors go after old debt that's past the statute of limitations to collect

Collection agencies often buy debt cheaply in the hopes that they can get consumers to make payments, even if the borrowers aren't on the hook for the debt, as in the case of debt that's already been discharged.

In other cases, you do still owe the debt, but collection agencies don't have the power to compel you to pay.

Be aware: While you can't be sued for collection of time-barred debt, creditors can generally still pursue you for payment. That means that they may pressure and intimidate you, but they don't have legal recourse to get you to pay. You have the right to request they stop contacting you, which they must obey under Consumer Financial Protection Bureau (CFPB) regulations.

Common Tactics Used by Zombie Debt Collectors

Here are some ways zombie debt collectors may try to coerce you into making payments:

• Misrepresentation: A debt collector may say they're someone else in order to scare you into paying. They might say, for example, that they're a lawyer or mediator.
• Threats and intimidation: Even though it's illegal to sue you for time-barred debt, collectors may threaten to do so. Debt collectors have even threatened borrowers with arrest if they don't promptly pay. Additionally, collectors may use abusive language or obscenities in an attempt to intimidate you, which is also illegal under the Fair Debt Collection Practices Act (FDCPA).
• False claims: Some collectors will try to manipulate you into restarting payments with the hope of collecting old debts. This may come in the form of promises to stop harassment for a small payment, or it may be a false assertion the debt will not show on your credit report if a payment is made.

Reminder: To avoid identity theft and protect your personal data, never confirm details like your date of birth or Social Security number with a cold caller. They could be a scammer attempting to collect your information. Legitimate debt collectors will never ask for this data over the phone.

How to Protect Yourself From Zombie Debt

When dealing with collectors, take these steps to authenticate debt, prevent unnecessary payments and protect yourself from harassment:

• Check your credit report. Get in the habit of checking your credit report regularly, and perhaps signing up for credit monitoring. This ensures you're aware as quickly as possible whether you've been a victim of identity theft. It also helps you become an expert in your own financial situation, so that debt collectors can't effectively lie to or threaten you based on false information.
• Get familiar with the statute of limitations on debt. After a certain amount of time, you are protected against lawsuits related to debts. Time frames vary by state and debt category. Contact your state's attorney general's office to find out the statute of limitations that applies to you.
• Validate all debt. Upon first hearing from a debt collector, request a debt validation letter. Specifically, ask for proof that the debt has not exceeded your state's statute of limitations. The debt collector must pause collections until it verifies this information if you send this request within 30 days of first hearing from them.
• Know your rights. When you're dealing with debt collectors, it's important to understand your rights as dictated by the FDCPA. This knowledge can help protect you if a debt collector threatens or harasses you or tries to add illegal fees to your balance.
• Negotiate your debt. Depending on the situation, you may be able to negotiate a payment plan or a settlement with the debt collector. But make sure you're aware of all the credit and tax implications of settling a debt, and consider hiring a lawyer if you're uncomfortable negotiating. By law, the collector will have to communicate directly with your lawyer if you request it.
• Send a cease and desist letter when necessary. This is a formal method of asking a debt collector to stop communicating with you. There are two circumstances when, by law, sending a cease and desist letter will end contact with debt collectors: if the statute of limitations has run out, and if you are "judgment proof," meaning you have no current or future assets that would satisfy a lawsuit judgment.

Frequently Asked Questions

The Bottom Line

Zombie debt can be a burden that leads to serious trouble if you're not aware of the most effective ways to manage it. If an old debt appears out of the blue, verify it, understand the statute of limitations and related debt collection laws in your state and be prepared to assert your rights.

Keeping an eye on your credit is one of the best ways to help keep zombie debt from sneaking up on you. Signing up for free credit monitoring from Experian gives you real-time alerts to changes to your credit, allowing you to act quickly and protect your financial health.