What Is Zombie Debt?

Just about everybody this side of Elon Musk or Jeff Bezos knows what “debt” is. They probably are not as familiar with “zombie debt.”

But as the name infers, Be Careful or It Will Get You!

Zombie debt is old debt you think is dead and buried, but it comes back to life. It starts chasing you in the form of debt collectors, who will stop at nothing in their attempt to chew up your bank account.

They might not get all your money, but their pursuit might cause you untold and needless stress.

It’s needless because often, the debt isn’t legitimate. You don’t owe them anything. You’ve paid, or are the victim of identity theft, or the statute of limitations has run out and you no longer owe it.

In other words, you don’t deserve to be hassled. Then again, neither do all those people who get eaten in zombie movies.

How Does Zombie Debt Resurface?

In movies and on TV, zombies are brought to life by radiation, sorcery, viruses, or other acts of God. In real life, zombie debt is usually brought to life by acts of debt collection companies.

Debt collection companies buy the rights to delinquent debt from creditors who have given up on recovering the money. The debt collector gets these bundles of debt for pennies on the dollar and tries to recover funds.

The bundles often include debts that are no longer subject to collection. Examples include debts that have been settled in bankruptcy, debts that have dropped from credit reports, and time-barred debts that have exceeded the statute of limitations on collection.

Unpaid debts are usually stricken from credit reports seven years after they appeared. Sometimes, the debt has been misreported. It doesn’t belong to you, or you’ve been a victim of identity theft.

Be careful how you respond to debt collectors, because paying even a small part of the debt can open a large can of zombie worms.

Common Tactics of Zombie Debt Collectors

As far as most debt collectors are concerned, all’s fair in love, war and making people pay up. Even if those people aren’t obligated to pay up.

Collectors will charge full steam ahead without verifying the debt is legitimate. Among their tactics:

• Threatening to take you to court, even if they don’t have any legal grounds to stand on.
• Saying they’ll leave you alone if you pay a small portion of the debt.
• Falsely claim they are a law firm and will sue you if you don’t pay up.
• Harassing you through threatening letters, emails, texts, and phone calls.
• Claiming you are legally obligated to give them information, like your Social Security number or bank information or even your current address.

You don’t have to tell debt collectors anything, though you might be excused for telling them, “Leave me alone or I’ll report you to the Consumer Finance Protection Bureau, you blood-sucking leech!”

The Risks of Paying Zombie Debt

Paying even a small portion of debt is like waving a bloody limb under the nose of a dormant zombie. It will spring to life and come after you.

Most debts have a statute of limitations regulating how long they can be collected. It varies from state to state, but it’s usually 3-6 years.

The debt may still be valid after the statute of limitations has expired, but the law says you don’t have to pay it. Debt collectors hope you don’t know that.

If you pay any amount of the debt, even if it’s $1, it will restart the statute of limitations back to Day One. It can reappear on your credit report, which will drag down your credit score and make it harder and more expensive to get a loan.

How to Handle Zombie Debt

To prepare for a real zombie invasion, experts advise you to stock up on food, water, tools, and ammo. Equally as important, don’t freak out. Remaining calm will help you devise a survival strategy.

Other than stocking up on ammo, the same advice holds true in a zombie debt invasion. Here are the steps to take.

1. Request a Debt Validation Letter

This is a document that provides information about the debt you may owe. Debt collectors are legally required to provide debt validation letters so consumers can determine if the claim is valid. It should include the following:

• Your name and address
• The debt collection agency’s name and address
• The name of the creditor or creditors that you supposedly are indebted to
• The account number associated with the debt
• The amount you owe, including an itemized list of payments, credits, interest and fees

After you receive the letter from the collection agency, you have 30 days to dispute the findings. The validation letter should have information on how to respond.

2. Verify the Debt

If you dispute the debt, you’ll send a debt verification letter back to the collection agency. It will assert that you don’t owe the debt and list the reasons why.

A common one is that the statute of limitations has run out on the debt. You’ll need evidence, like the original loan agreement and a documented payment history.

To help find your debts, the three credit reporting companies (Equifax, Experian, and TransUnion) offer free access to your credit reports.

If anything looks fishy, report it to the bank or lender. You might have been scammed or been snared in an identity theft ploy.

Whatever you do, don’t acknowledge the debt unless you are certain it is legitimate.

The Consumer Financial Protection Bureau offers sample letters that can help you write a verification letter. Send it via certified mail with a return receipt request.

3. Dispute the Debt

How do you dispute a debt you don’t owe? The verification letter should include all essential details, like your contact information and account number linked to the debt.

Include the date you wrote the letter and a description of the dispute. Include evidence like contracts, invoices, purchase orders, and delivery receipts.

If that doesn’t resolve the issue to your satisfaction, what next?

4. Report the Debt Collector

Most debt collectors are not scumbags, but some engage in harassment, false representation, or other illegal practices. If you have any problems with the debt collector, report it to your state’s attorney general’s office, the Federal Trade Commission or the CFPB.

Debt collection laws are different from state to state and also differ from some federal laws. Your state attorney general’s office can help you determine your rights under state law.

5. Freeze Your Credit

Placing a security freeze on your credit reports keeps creditors from accessing them. They won’t be able to approve any new credit accounts. You can lift the freeze if you want a creditor, such as a mortgage company, to have information for a prospective loan.

You can place a freeze by going to the websites of the three credit bureaus. Or you can call them. The numbers are:

TransUnion: 888-909-8872

Experian: 888-397‑3742

Equifax: 888-378-4329

6. Don’t Share Information

Debt collectors can ask questions to verify your identity, and it’s okay to give them basic info like your name and address. But do not give them any personal information like your Social Security number or financial info, like credit card or bank account numbers.

At least don’t do it until you have verified the debt and are sure it’s not a scammer on the other end of the phone. Identity theft is a multi-billion-dollar business, and you do not want to become yet another victim.

Preventing Zombie Debt

So much is bought on credit these days, it can be hard to keep track of it all. But not keeping track makes it easier for zombie debt to take root.

Monitor your bank account for credits and payments. Check your credit reports for suspicious activity.

Your report will list the lines of credit you have open, and which are closed. As we mentioned earlier, the credit bureaus have to give you free access to such information once a year.

You could consider signing up for an identity theft service. There are plenty of them out there like LifeLock, McAfee and Aura, so shop around for the best deal.

If you get a call from a debt collector, don’t ignore it. The debt just might be legitimate, and you don’t want it to grow due to interest charges and other penalties.

And most importantly, pay your bills. Easier said than done, right?

Stay Ahead of Zombie Debt

The root of zombie debt is careless spending, bad financial planning, and lax monitoring. But even if you’re a spendthrift who watches every dime, staying out of debt can be hard in these inflationary times.

Millions of Americans have sought help through nonprofit debt relief organizations. They offer credit counseling, financial planning and can recommend strategies like debt settlement or a debt management program.

Such programs aren’t as much fun as blowing the head off a flesh-eating monster, but the result is the same. They can get you out of debt.

And when you have no debt, it can’t turn into a zombie.