Zombie Debt: Don’t Let It Rise To Bite You

Zombie Debt
BY Gideon Sandford
Feb 7, 2023
 - Updated 
Jun 13, 2024
Key Takeaways:
  • Zombie debts cannot be legally collected.
  • Debt collectors have to prove you owe the debt.
  • If you admit you owe the debt, it might become collectible.

What is a Zombie Debt?

So-called “zombie debt” refers to loans that are too old to collect, were discharged in bankruptcy, or that debt collectors can’t properly document. It also refers to debts that resulted from identity theft, where the thief opened credit cards or loans in your name. Instead of giving you a clean slate and a fresh lease on life, some debt collectors will keep harassing you into repaying zombie debt, even if you don’t legally owe it and they can’t legally collect it.

Different types of zombie debt

Zombie debts come in a few shapes and sizes. Such as:

Forgotten debts. These are legitimate debts that you may have overlooked or forgotten about over time. Maybe it's an old medical bill or a credit card balance from years ago. Debt collectors can still come after you for these, even if they slipped your mind.

Time-barred debts. These are old debts, and legally, they can’t be collected. Every state has a statute of limitations for debt. That’s the number of years since the last activity (usually the last payment due date) during which the creditor can sue you. Once those years pass, they can’t win against you in court. But just because they can't sue you doesn't mean they won't try to collect. 

Errors. The debt collection world is full of errors. For instance, debts get sold to debt buyers. Your debt could end up on a list that gets sold multiple times. A debt collector might contact you after you’ve already paid the debt off. 

Fraudulent debts. Unfortunately, sometimes fraudsters rack up debt in someone else’s name. You aren’t responsible for repaying debts that are the result of identity theft or fraud, but you might have to go to court to prove your case. 

Each type of zombie debt requires a different approach. If a debt rises from the dark, don’t be scared. Figure out what kind of debt it is so that you’ll know what your plan of attack will be.

How zombie debt rises

Zombie debt usually doesn't appear out of nowhere—it has its origins. In fact, much like a ghost story. 

Zombie debt can be old, unpaid debts. These debts are often sold and resold to different debt collectors. Over time, it can be harder and harder to verify the legitimacy of the debt. 

Sometimes, debts come back to life because of mistakes in credit reporting. Maybe you paid off a debt, but it was sold to a new debt collector who reports it as unpaid. Maybe the credit bureau mixes you up with someone who has the same name. 

Another common cause of zombie debt is shady debt collectors. Many people are intimidated by debt collectors and might even pay a debt without researching it first. Unethical debt collectors may try to collect debts that they know are uncollectible, hoping to cash in. 

If you know which rock the zombie debt crawled out from makes it easier to defend yourself against it.

Identifying zombie debt

Spotting zombie debt requires a little sleuthing. You are your own best advocate, and you should make the effort to look for clues and verify facts. You don’t want to pay a debt that you didn’t have to pay. 

One of the first signs of zombie debt is unexpected collection calls or letters out of the blue. If you don’t recognize or remember the debt, it’s time to dig deeper. Ask for written validation of the debt. Debt collectors are required to give you information about the debt.

Another red flag is when very old debts reappear on your credit report. Collection accounts should be removed from your credit report after seven years. The clock starts on the date of delinquency, which is often six months after your last payment due date. You can check your credit reports online for free, and you should do so at least once a year. If something looks suspicious, you can dispute it while you’re viewing your credit report. That forces the creditor to investigate the debt and notify you of the results. If they don’t, it must be removed from your credit report. 

Be suspicious if debts that you’ve already paid come out of the woodwork. This could mean that a paid-off debt has been sold to a new debt collector. If a debt you've squared away in the past comes back to haunt you, it’ll be really helpful if you can produce evidence that you paid it off. That kind of documentation could be your best defense against invalid claims.

Can you ignore zombie debt?

You shouldn’t ignore a debt collector. It’s better to stand and fight. In some cases, you can kill zombie debt in minutes. In other cases, the battle could last a little longer.

If the debt is legally unenforceable because it's past the statute of limitations, the debt collector can't sue you for it. But they might still call, send letters, or bug you on social media. Write a letter asking them to stop contacting you. Don’t acknowledge the debt or make a payment, or you might unintentionally restart the clock on the statute of limitations.

Fraudulent debts or errors need to be addressed quickly to put a lid on the damage and protect your credit score. File a dispute with the credit bureaus, a police report if your identity was stolen, and gather any paperwork that could prove the debt isn’t yours.

When dealing with debts that are yours but are old but still collectible, you might want to confront it head-on. Contact the debt collector and negotiate a settlement if possible. If you have access to cash, offer a lump sum that’s less than the amount you owe. Or ask for a payment plan. You could also ask for both a payment plan and a reduced payoff amount. There are no rules about what you can or can’t ask for. Ignoring your debts could lead to lawsuits and greater financial consequences. 

Who collects on Zombie Debts?

So-called “debt scavengers” buy old debt, hoping to collect some or all of the money, even if it’s no longer legally owed. There’s no standardized method of buying and selling debt, so some old loans are bought and sold using something as simple as a spreadsheet, on a thumb drive or even over email. While some debt collectors try to behave ethically, they may not even know if they’re trying to collect on a debt that has already been repaid, was never owed in the first place, or is uncollectable.

What kind of debts do Zombie Debt Collectors target?

Credit card debt is the most common form of zombie debt that debt scavengers love to go after. Since the government so closely regulates banks, they can’t keep unpaid credit card debt on their books for more than a few months. After that, they often sell the right to collect unpaid credit card balances to debt collection agencies for pennies on the dollar.

Once a collection agency has bought the debt, it can be bought and sold multiple times; even long past when agencies are legally allowed to sue you for repayment.

How do debt collectors try to make you pay Zombie Debts?

The worst debt scavengers are more than willing to act unethically or even illegally to get you to pay zombie debts. One common tactic is asking you to admit you owe an old debt and make a “token” payment. That can restart the statute of limitations and put you on the hook for a debt you may never have legally owed.

Other tactics are outright illegal. If a debt collector threatens to call the police or have you arrested for not repaying an old loan, you can report them to the Federal Trade Commission. The Fair Debt Collection Practices Act protects you from many common abuses, but if you don’t know how to deal with collection agencies, you won’t be able to protect yourself. For example, debt collectors can’t share your personal financial information with anyone else, like your friends, family, or employer, to intimidate you into paying old loans.

Keep these weapons in your arsenal to protect yourself from debt scavengers

Validate the debt

If a debt collector can’t provide you with written evidence that they legally own your loan, they can’t sue you to collect it. As soon as a debt collector contacts you about an old loan, ask them for documentation. They’re legally required to provide proof within five days.

Stop the harassment 

Debt collectors can’t contact you at work if you tell them you’re not allowed to receive calls there, and they can’t discuss your finances with anyone but you or your spouse. If they keep calling, tell them you know your rights and that you’re alerting the Federal Trade Commission and your local attorney general about the violations.

Don’t resurrect the zombie debt 

If you admit you owe a debt, even over the phone, debt collectors can use that as an excuse to reset the statute of limitations and the seven-year credit reporting period. Until you are sure you’re ready, never discuss old debt over the phone.

Choose your method of attack 

If you’re contacted about a debt you don’t owe, tell the debt collector you know your rights and won’t pay anything you don’t owe. Then contact each of the credit reporting agencies and tell them to have it removed from your credit report. You have a couple of options once you’ve made sure you really owe the debt: 

  • Offer to settle the debt, either on your own or with the help of a professional debt negotiator. 

  • Fight the debt in court if you’re sued. Remember, if you haven’t resurrected the zombie so to speak, and the statute of limitations has passed, they can’t win a judgment against you for that debt. Also, and for smaller loan amounts especially, the debt collector may not even show up, and you might win your case by default. Remember, debt collectors buy millions of dollars in debt, expecting only to collect a tiny percentage of that amount.

The zombies can’t survive against you once you’re prepared for the battle.

Frequently Asked Questions

How long does old debt last on my credit report?

What the credit bureaus call “derogatory information,” like unpaid loans, can only be reported on your credit history for seven years, but making payments or promising to pay can restart that clock. If a zombie debt is reported after seven years, contact each credit bureau and ask them to remove it.

How long can debt collectors sue me?

The period during which you can be sued for an old debt, called the statute of limitations, depends on your state. In most places, it’s between 3 and 7 years. That means depending on where you live, a debt might linger on your credit report longer than you can legally be sued for it.

Who can debt scavengers contact about zombie debt?

Debt collectors can only talk to you and your spouse about your finances. They may find information about your friends and family online, but they're breaking the law if they contact those people to discuss your old loans or ask for money.

How can debt collectors contact you?

Debt collectors can call you between 8 a.m. and 9 p.m. unless you permit them to call you at other times, but they can’t harass you. If you’re getting multiple calls a day, or threatening calls, then tell the debt collector you know your rights and report them to your state’s attorney general. 

If you are being contacted by debt collectors, read this article about how to stop collection calls.