Zombie Debts -- What They Are and Why You Should Be Concerned

/ BY / Managing Debt

If you think old debts can't come back to haunt you, think again. The collection of zombie debts (very old debts) is becoming more and more common as third-party collection agencies attempt to collect debts that you may or may not be responsible for.

If you get a call from a debt collector about a debt you are unaware of or unsure if you owe, don't panic -- knowing what to do in the event a zombie debt surfaces can help protect your credit and save you money.

What are zombie debts?

Quite simply, zombie debts are old, previously uncollected debts that the original creditor has stopped trying to collect. Zombie debt collectors are third-party collection companies that purchase unpaid debts for pennies on the dollar. Once purchased, they completely own the debt and any money collected is kept solely by them for their own profit.

Zombie debts are usually years old and many have surpassed the statute of limitations. This type of debt collector rarely check the validity of the debt, and many practice unscrupulous and even illegal debt collection practices by calling at all hours and demanding money. Often, these calls will come from blocked or "unknown" numbers, making them difficult to trace.

What to do if you're contacted by a zombie debt collector

Zombie debt collectors will almost always try and settle the debt with you by offering a "limited time deal" to pay less than the original amount of the debt. If you receive a phone call about a debt you are not sure you owe, follow these tips:

  1. Do not give the debt collector any information. Ask them for their mailing address and the name of their company and hang up. Do not be intimidated by threats or their limited time offers to pay the debt. Legally, you have 30 days to contest the debt.
  2. Request debt verification. If you receive a letter or phone call from the company, respond within 30 days and request verification of the debt. Oftentimes, the zombie debt collector will not be able to provide this and all debt collection attempts must cease.
  3. Check the statute of limitations in your state. If you receive notice that the debt is indeed valid, don't rush to pay it. Check first to see what the statute of limitations in your area is and if it has passed. If it has, the debt is no longer enforceable. For a list of debt collection statutes of limitation by state, click here.
  4. Do not pay money until the debt and date is verified. It is very important that you do not pay any money until the debt collection agency has provided written verification of the debt and confirmed that the collection is taking place within the statute of limitations in your state. Paying any amount on the debt not only acknowledge that you take responsibility of the debt, but it also resets the statute of limitations, making the debt valid and enforceable whether it is or not.
  5. Check your credit score. If you are contacted by a zombie debt collection company, check your credit score to make sure it hasn't been reported. You can get a free credit report each year from www.annualcreditreport.com.

Staying safe from zombie debts

Knowing your rights is the best defense against zombie debts that can rise from the dead and haunt you and your credit score. If a zombie debt collector contacts you, follow the procedures outlined above to ensure your credit rating stays safe.

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Please note your financial situation is unique and our tips & advice presented here may not be appropriate for your situation. CreditCardXpo.com recommends that you seek different advice & opinions from your own accountant or financial adviser who understands your individual circumstances before making any important decisions or implementing any financial strategy.