According to some sites Zombie Debt is debt that suddenly reappears, coming back to haunt you. It is a debt that you were not aware of or did not pay; debt that might not be yours or debt that you paid but reappears on your credit report. It is debt that might reappear after a bankruptcy filing and is often time-barred debt. More about time-barred debt later.
Creditors (those you owe money to) might sell your debt to a collection agency after the creditor has made several attempts to collect on the debt. That collection agency might sell your debt onward to another debt collection agency, and so on.
Often the collection agency pays pennies on the dollar for the debt in the hopes that they can get a person to pay the old debt. There are companies who buy delinquent accounts in bulk.
The term Debt Scavenger is the unflattering term often used for aggressive debt collection companies who use unfair tactics to collect on debts.
Forbes warned in 2008 of such collectors in the online article "Beware of Zombie Debt Collectors."
Nerd Waller.com had an interesting article titled: "Arm Yourself Against Zombie Debt" (July, 2020)
Zombie Debt is usually old and often past the time when a person can be legally responsible to pay the debt. The creditor (or company) has lost the legal right to collect on the debt after a set number of years. (statute of limitations)
One way to protect yourself against zombie debt is to know what debts you really owe. You can obtain a free annual credit report. Read the report carefully and see if any "old" debt has suddenly resurfaced on your report. Or... is there is a debt amount or creditor that you do not recognize on your report.
If you have been the victim of identity theft, there may be debts in your file that are not yours. The fact that the debt is not yours is of little consequence to some debt collectors. They will still attempt to collect the debt from YOU.
Time- barred debt - there is a legal limit as to how many years a debt can be collected. It varies by state and by type of debt. More about type of debt later.
According to Colorado Statute 2016 Colorado Revised Statutes. Title 13 - Courts and Court Procedure. Limitation of Actions. Article 80 - Limitations - Personal Actions§ 13-80-103.5. General limitation of actions - six years. Universal Citation: CO Rev Stat § 13-80-103.5 (2016)
"(1) The following actions shall be commenced within six years after the cause of action accrues and not thereafter: ..."
(Note: the above may not be the most recent revised statute and Statutes can and do change.)
The term...and not thereafter..is important, since it frames the time period of when a creditor or debt collector may collect a debt. In Colorado, the 6 year statute of limitations is for all four types of debt. However, remember that this does not deter collectors from attempting to collect on a debt. Also, what is true in Colorado is not true in every state.
Types of Debt - in General there are four types/classifications of recognized debt.
Promissory Note - is a promise to pay in writing. Examples in general of promissory notes are home loans and student loans. Debt is most often paid in set payments.
Oral - there is nothing in writing, it is a verbal agreement to pay.
Written Contracts - have defined terms and conditions of the loan. An example of this would be medical debt that you might have for services.
Open ended - examples are credit cards and lines of credit.
Remember, almost any of these types of debts can be 'resurrected' by a collection agency. Often, if you pay any portion of the zombie debt, the clock is 'reset' on the entire debt and the debt can be revived.
Do not ignore the debt. If you have questions, seek professional advice.
Working To Preserve Your Wealth and Protect Your Future...in a Constantly Changing World
Please read my full Disclaimer and How I Can Help You
Visit my website: www.attorneybarbaradalvano.weebly.com for more articles; information about free webinars and printable infographics