Home > Managing Debt > What Is Zombie Debt and Why Is It a Problem?

Comments 18 Comments
Advertiser Disclosure

Disclaimer

Zombie debt is exactly what it sounds like. It’s debt that’s already dead and shouldn’t be living on your credit report. But for whatever reason, it’s risen from the grave and chasing you down. Find out what you need to know about zombie debt and how to deal with it.

How Does Zombie Debt Happen?

The most common cases of zombie debt involve collection activities. Here’s one example of how a zombie might rise with help from a collection agency.

  • You default on a debt.
  • The original lender or collection agency fails to collect within the statute of limitations.
  • The unpaid debt falls off your credit report after a certain amount of time.
  • But a separate collection agency, which purchased the debt for pennies on the dollar at some point, revives the debt and tries to collect it.

That collection agency may report the debt as owed to the credit bureaus. Suddenly, the debt reappears on your credit report, except now it’s a zombie debt.

Zombie Debts and Judgments

If the original creditor went to court and obtained a judgment against you for a debt, the zombie debt cycle can be more complicated. It can also seem a bit more vicious.

First, judgments provide the creditor with the legal means to collect via actions such as wage garnishments or bank account liens. How long a judgment is good for depends on the state it was issued in, but most states allow judgments to be renewed at least once. Some states allow judgments to be renewed an unlimited number of times, which makes them potentially limitless.

Judgments can also show up on your credit report for years. In some states, judgments might show up for two decades if the creditor renews them.

Why Is Zombie Debt Such a Problem?

First, if you legitimately owe the debt and it’s still collectible, you could find yourself facing collection activities. That can include wage garnishment or levies. The result can be a difficult financial hit that makes it hard for you to cover your other obligations.

Even if the debt is truly dead and no longer collectible, if it resurfaces on your credit report, it can bring down your score. That makes it harder to get new credit.

How Can You Protect Yourself From Zombie Debt Collectors?

Fans of pop culture movies and comic books know how to kill a zombie. You go for the headshot. But the answer to slaying zombie debt isn’t so simple. How you protect yourself against zombie debt collectors depends on why the debt is sticking around or coming back to life to begin with.

Debts Past the Statute of Limitations

In cases where the debt collector is trying to collect a debt that has been revived past the statute of limitations, the law is on your side. Send the debt collector a letter disputing the debt. Legally, they must halt collections activity until they provide documented proof that the debt is legal and still collectible.

Obviously, zombie debt collectors aren’t always playing by the same rules as others, though. In some cases, they may be aggressive in their pursuit of payment. Make sure you understand your rights under the Fair Debt Collection Practices Act. Stand up for your rights and consider consulting with an attorney if you believe creditors are infringing on those rights.

Remember that one of your rights is to an accurate credit report. If a collection agency reports a dead debt that can’t be collected to the credit bureau, you may be able to dispute it.

When Judgments Turn Debt Into the Undead

If a judgment has been entered and the creditor can renew it, the debt could be collectible for years. In some cases, you could be on the hook for decades.

There are a few options for dealing with this type of zombie debt. First, contact the creditor that originally secured the judgment. Work directly with them and not a secondary collections agency if at all possible.

Try to negotiate a settlement. The debt is old now, and they may accept a partial payment of the balance and agree to list the collection as paid. Once that occurs, no one else can continue to take action to collect the money from you.

If you can’t afford to settle the debt or you’re dealing with several collection accounts or judgments, you might consider bankruptcy. Bankruptcy converts all debts covered under the plan into secure and nonsecure debts. Then, they’re all treated the same way, regardless of whether a judgment was entered.

While you’re under the protection of bankruptcy, no creditor covered by the petition can take any action to collect from you. Instead, they are paid based on a schedule by the bankruptcy trustee. Once the bankruptcy is finalized, the debts are considered settled and paid off.

Get Help Dealing With Zombie Debt

Battling zombies requires skill and fortitude. So does dealing with zombie debt. If you’re not sure where to start to revive your struggling credit score and slay zombie debt, consider working with a credit repair agency. These professional zombie debt hunters have all the right tools to repair credit, and they can teach you to wield them.

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.



Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team