What is zombie debt

Be careful: Making even a single payment on an old debt can bring it back from the dead. Creditors regularly remove old debt from their books and sell it to third-party debt collectors for cents on the dollar. But as debts are sold and resold, information can decay, leading collectors to seek payment on an erroneous debt. Debts you already settled with a creditor. Fraudulent charges from identity theft. Debts wiped out in bankruptcy. Debts beyond the statute of limitations for when you can be sued for payment.

Collectors can profit even if they collect only a portion of the original debt, so they have incentive to resurrect old bills years after the debts were incurred. Dig through your old records, such as receipts and bank statements, to get as much information as you can on the debt and proof of its payment.

Represent themselves as a "litigation firm. But many debt scavengers lie in order to scare consumers into believing that a lawsuit is just around the corner if they don't pay up. If a collector calls you about a debt that's old or that you don't think you owe, you can protect yourself by taking certain steps, like not talking to the collector you don't want to inadvertently give the collector useful collection information or, even worse, admit you owe a debt that isn't yours or say something that revives a debt after the statute of limitations has run and requesting validation of the debt.

If you need help dealing with abusive debt collectors, or if you're facing a collections lawsuit, consider talking to an attorney to find out what to do in your particular circumstances. To learn factors to consider when deciding if you should hire an attorney to defend you against a creditor lawsuit, see Should I Get a Lawyer If a Creditor Sues Me?

The information provided on this site is not legal advice, does not constitute a lawyer referral service, and no attorney-client or confidential relationship is or will be formed by use of the site. The attorney listings on this site are paid attorney advertising. In some states, the information on this website may be considered a lawyer referral service.

Please reference the Terms of Use and the Supplemental Terms for specific information related to your state. Grow Your Legal Practice. Meet the Editors. Debt Scavengers and Zombie Debt. Learn how to avoid the horror story of debt collection harassment over old "zombie" debt. Types of debt typically found in a debt scavenger's portfolio include: Debts where the statute of limitations has run. How to Protect Yourself from Zombie Debt Collectors If a collector calls you about a debt that's old or that you don't think you owe, you can protect yourself by taking certain steps, like not talking to the collector you don't want to inadvertently give the collector useful collection information or, even worse, admit you owe a debt that isn't yours or say something that revives a debt after the statute of limitations has run and requesting validation of the debt.

Talk to an Attorney If you need help dealing with abusive debt collectors, or if you're facing a collections lawsuit, consider talking to an attorney to find out what to do in your particular circumstances. Talk to a Bankruptcy Lawyer Need professional help? Start here. Practice Area Please select Zip Code.

Additionally, if the debt is listed on your credit report, dispute it directly with the three major credit bureaus : TransUnion, Experian and Equifax. Although you can normally only view one free report from each of the three major credit bureaus each year, due to the coronavirus pandemic, you can check all three of your reports for free weekly through April 20, To prevent current debt from becoming zombie debt, pay it on time and keep records of your payment history.

You can also use a debt payoff calculator to come up with a repayment plan that fits your budget. Dispute the debt with the credit bureaus or creditor if you find that an error has been made. How We Make Money. Jerry Brown. Written by. Jerry Brown is a contributing writer for Bankrate. Jerry writes about home equity, personal loans, auto loans and debt management.

Edited By Rashawn Mitchner. Edited by. Rashawn Mitchner. Rashawn Mitchner is a former associate editor at Bankrate. Suddenly the phone rings That old theft has come back to haunt you. The agency has no record of your fraud report and considers you responsible for the debt. The agent informs you that if you don't pay up -- and soon -- you could risk legal action.

And the debt could jeopardize your loan application for that condo. Unfortunately, the zombie metaphor is incredibly apt. On the credit market, debts are sold and resold from agency to agency, so something you may have settled -- even more than once -- can spring back to life, with no record of past payments. Collectors grab for whatever they can get.

And the debts are hard to kill. These debts are reanimated by collection agencies hoping to make some extra profits. You know the guy in the B movie who seals his own doom by panicking and getting himself cornered by the relentless zombie army? Zombie debt collectors expect you to be that guy. They make their profits from consumers who don't know their rights, don't know how to protect themselves, and panic. To understand why zombie debt is big business, you need to know a bit about debts, debt collection and consumer credit.

Let's say that in Jane, fresh out of college and awash in debt, defaulted on a credit card. In , she entered bankruptcy. Since then, she's painstakingly rebuilt her credit, paying her bills on time and checking her credit report at least once a year.

Because more than seven years have elapsed, the old default and the bankruptcy proceedings no longer even appear on her credit reports. But what happened to that default? The credit card company wrote it off as bad debt -- that is, the company took the debt as a loss.

You'd think it might stop there, but you'd be wrong. When a company writes off a debt, it often sells the debt to a collector. Depending on the age of the debt, the collector might pay as much as 12 cents for every dollar owed, or as little as a fraction of a penny [source: Weston ]. What's the point of this transaction? It enables the company selling the debt not to take a total loss. But what does the collector have to gain?