Zombie Debt 101

October 18, 2018

Zombie debt refers to old unpaid debt, declared dead and uncollectable long ago, that rises from the grave to ingest the bank accounts of the living. Who are the mad financial scientists that create this zombie debt, and how can you thwart them when it comes for you?

The zombie masters, if you will, are third-party debt collectors who specialize in purchasing uncollected debt from a variety of vendors at huge discount. The vendors are eager to get the debt off their books and will gladly take whatever they can get – literally pennies on the dollar.

If you have any connection to this debt in the eyes of the collection agency, they will contact you and attempt to get you to pay. It doesn't matter to them whether you really are responsible for the debt, whether the statute of limitations has expired, whether it was wiped out by bankruptcy, or any other story – their job is to convince you to pay up. It is not uncommon for zombie debt to be the result of identity theft or mistaken identity with a similarly named debtor.

Collection agencies cannot harass you or cross certain boundaries in their collecting efforts. They cannot report the debt to credit agencies under your name or threaten to sue – that is illegal, and you can take action against the collection agency. There are specific places and times that debt collectors cannot contact you, such as before 8 a.m. and after 9 p.m. in your local time zone, according to the Fair Debt Collection Practices Act (FDCPA). However, there is little else legally stopping them from continuing to contact you.

Just as with the movie analogy where zombie victims put themselves unnecessarily in danger, victims of zombie debt seal their own fate by their actions.

Never agree to pay any portion of the bill in the hope that they will go away satisfied. That could be construed by courts as assuming responsibility for the entire debt, and effectively resets the statute of limitations on retired debt.

It is also wise to not converse over the phone with the collection service – many of them are skilled in getting you to say anything that could possibly be considered as an admission of responsibility for the debt.

And, for goodness sake, never give your bank information to any of these collection agencies. If you do that, you are the idiotic character charging into the abandoned house full of zombies with no weapons but a dead flashlight.

What if you are not sure if the debt is real? It doesn't matter, because in any case you will need to take the same steps.

First, you need the company's mailing address – you want to address this issue in writing. If they will not give it to you over the phone, look for their information online. You may find it is a scam company that already has outstanding complaints with your state attorney general's office or the Federal Trade Commission (if so, be sure to report them again).

Once you have the address, send them a certified letter notifying them that you dispute the debt. Be careful in your phrasing – do not leave any hint that you may be responsible. Sample letters are available online for reference.

Thanks to the FDCPA the collection agency must send their verification evidence to you by mail, allowing you to verify whether it is your debt or not, and if the statute of limitation has expired. With proof that you are not responsible for the debt, you can submit a cease-and-desist letter to the collection agency.

Be sure to monitor your credit report while the dispute is going on to make sure it is not being falsely reported. If it is, immediately start the correction process with the credit-reporting agency. You can check your credit score and read your credit report for free within minutes by joining MoneyTips.

In zombie movies, the survivors are usually the ones who don't do anything foolish, and that is also the case with zombie debt. Do not lose your cool – follow our advice, and the zombie debt will go off to haunt someone else.

If you want to settle outstanding debts for less than what you owe, join MoneyTips and use our free Debt Optimizer tool.

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