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

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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.

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