Zombie Debt

zombie debtI 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.

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5 Responses to Zombie Debt

  1. nick says:

    Boston Globe recently published a four-part special report on the business of debt collection in Massachuesetts.


  2. ~Dawn says:

    You should also save all paperwork communication with the collection agency, if they don’t remove, sue the scum.

  3. Hunter says:

    News Flash! If you pay your debts, then you don’t have to worry about Zombie Debt! If you can’t aford to pay, then don’t buy on credit in the first place. If it’s not a legitimate debt, then by all means contact the credit reporting agencies.

  4. Pingback: Personal Finance Advice - » Downright Scary Debt Collection Tactics

  5. Robert says:

    Hey know-it-all Hunter with your big news flash, wake up. My zombie debt was brought about through hospital testing ordered by a doctor. When I told the Dr I was uninsured, he told me not to worry, we need to get me well first and worry about the cost later. The extensive testing he ordered uncovered nothing, the doctor was at a loss as what to do and sent me home with a bunch of drugs.

    Another doctor found the problem and I was cured, leaving a massive amount of debt from the 1st Dr that I would never be able to pay.

    The day I was ordered into court, I found the place jammed with people, and guess what, they were All there with the same problem from the same hospital.

    This debt occured in 1988. I was continuously hounded and taken to court a total of 6 times over this with everyone agreeing I have no ability to pay. Yet on they went with more threats and every 6 months another summons.

    The registration for my 12 year old automobile was revoked four years in a row because I was unable to keep up with the insurance payments. I was at one time 5 months behind in my rent and eventually evicted.

    Do you really think you know what you’re talking about? Maybe you should listen more and say less. In case you haven’t noticed, in this society if you don’t have money you are scum.

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