I was contacted by a friend that was having trouble with a collection agency regarding a very old debt she had. In fact, the debt was over 9 years old so she assumed that it was long history, but all of a sudden it appeared in her credit report as a recent debt. She couldn’t understand how this had happened and wanted to know what she should do. She had found herself in a growing problem of “zombie debt.”
Zombie debt gets it’s name because it’s debt that seems to rise from the dead. When a debt becomes seven years old, in most cases it should be erased from your credit report whether it’s been paid in full or not. If it hasn’t been paid off, your lender or creditor will most likely write off the debt as a loss. They will not stop there, however, in most cases. They will take any uncollected debt and sell it to collection companies for pennies on the dollar.
While these collection companies know that they will not be able to collect most of the money, they pay so little for it that even if they are able to collect on a few of them, they can make a lot of money. They will try extremely hard to collect at least a portion of the outstanding debt and sometimes they will engage in illegal activities to do so. One of these practices is to report the old debts to the credit bureaus as if the debts were new, uncollected bills. This is officially referred to as “re-aging” in the debt business, but is commonly referred to as “zombie debt” since it is debt that has arisen from the dead.
Although zombie debt is illegal, it’s a growing problem because it is an effective way to place pressure on a person to pay old debt. Once a person has had the debt erased from their record, they are shocked to see it appear again and often want to get rid of it as soon as possible. This is exactly what the collection agencies hope for and will often offer to report the bill as paid if a person will pay a part of the debt, thus removing it from the credit report.
If you find that zombie debt has appeared on your credit report, your best course of action is to contact the credit bureaus directly and dispute the debt. If you have proof that shows the debt is over 7 years old, has been paid or the debt was discharged in personal bankruptcy court, this proof should get the debt removed from your credit record. If you don’t have proof, contact the credit bureaus and demand the collection agency show proof of the debt being legitimate and recent. While this process will take a bit longer, if they can’t show the debt it recent, it also will eventually be removed.