What you should know about “zombie debt”

On Behalf of | May 11, 2023 | Bankruptcy, Chapter 7

If you’re dealing with overwhelming debt, you may have lost track of everyone you owe and how many collectors are contacting you. One thing you should be careful about is something called “zombie debt.”

A zombie debt is often a debt you no longer owe because it has passed the statute of limitations for collections, you already negotiated it down and paid it off or it was never yours in the first place. It’s typically no longer on your credit report. 

However, none of those things may stop a determined debt collector from finding it and trying to collect on it. Remember that they get a cut of everything they collect.

How do zombie debts happen?

These debts get resurrected in any number of ways. Maybe you made a payment on an expired debt, which brought it back to life. 

Perhaps as an old debt you paid off, negotiated or has expired was sold multiple times to new collectors, ending up with someone who thought there was something still owed. Even debts that were discharged in bankruptcy can show up again as zombie debts.

Zombie debts may not even be legitimate debts. You may have been the victim of identity theft, for example, and not even realized it.

How to avoid paying what you don’t owe?

If you don’t recognize a debt that a collector is contacting you about, you have the right to ask for a debt validation letter that will provide information about the debt. This will allow you to challenge it if it’s something you don’t owe. One attorney with the National Consumer Law Center says, “Even if you’re feeling pressure during a phone call, don’t agree to make even a $20 payment.”

If you’re considering bankruptcy because of very real debts, it’s crucial to know if you have any zombie debts. If you file for Chapter 7 bankruptcy and discharge debts, it’s still important to beware of debt collectors who could try (mistakenly or not) to collect on debt you’ve discharged. By having sound legal guidance throughout the bankruptcy process, you can avoid mistakes that can prevent you from moving forward to a healthier financial future.