Zombie Debt: How to Deal with Collectors of Old Debts

When you repeatedly miss monthly payments, your creditor may send the account to a debt collection agency. Debt collectors then pursue you in order to get the account paid off. Of course, we want consumers to be responsible and pay off debt, but we also want them to be aware of the law and know their rights.  Depending on which state you live in, there is a statute of limitations regarding how long debt collection agencies can hassle you. After this time, you no longer legally owe the debt to them. But, a new and haunting trend is developing–Zombie Debt!

How Debt Collection Agencies are Scaring Consumers

Debt collection agencies buy and sell accounts all the time. Because of this, they sometimes bring accounts back to life (creating “zombie debt”), even after the statute of limitations has passed. You may have an account over a decade old, but a new collection agency can buy it and then come after you. Legally, you are not obligated to pay, but there are 3 steps you need to take.

#1 Don’t Talk

Engaging with debt collection agencies, especially if you make a promise to pay, can be extremely dangerous. By doing this, you may “reset” your statute of limitations, taking you back to square one.

#2 Stay organized

Debt collection agencies sometimes sue consumers over these old (now zombie) accounts. It’s extremely important that you have proof about the age of your account. And one more thing: show up in court. Failure to appear in court could end up making you liable for the debt.

#3 Avoid the Zombies altogether

Hopefully you can avoid the problem of zombie debt altogether. Here are a few tips:

  • Send a cease and desist letter via certified mail (look online for templates). The collector will then only have one more opportunity to contact you via phone.
  • File a credit bureau dispute to remove any items older than 7 years.
  • Pay off the account before the seven year mark. Doing this can give a slight boost to your credit score.
  • Budget wisely. Seek credit counseling or a Debt Management Plan before your problems get out of control.

Worried about debt collectors? Start with a FREE budget review and credit counseling session.

What’s your scariest debt story?

Thomas Bright is a longstanding Clearpoint blogger and student loan repayment aficionado who hopes that his writing can simplify complex subjects. When he’s not writing, you’ll find him hiking, running or reading philosophy. You can follow him on Twitter.

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13 responses to “Zombie Debt: How to Deal with Collectors of Old Debts”

  • I have a credit card debt that is almost seven years old. It is past the SOL in my state. The debt has been kept by the original creditor until now, but I got a letter from an agency claiming that the original creditor is their client and they are collecting for them. It states that I must dispute the debt with them in writing within 30 days or it will be considered a valid debt. If I do not respond at all will their assumption of validity by my silence reset the clock on credit reporting for another 7 years?

    • Thomas Bright

      Jay, I think it actually is the other way around. If you respond and aren’t very careful in what you say, it might revive the debt. Here’s a great resource that goes into more detail: http://www.nolo.com/legal-encyclopedia/the-statute-limitations-ran-credit-debt-can-the-collection-agency-still-contact-me.html

    • There is a difference between considering it valid and presuming it is valid. A presumption is rebuttable. A collection agency likes to make you think if you don’t reply the debt becomes valid, but that is not the case, just you lose a little leverage in your threatening them back when they continue to harass you.
      I write them back as soon as I can stating the alleged debt is in dispute and never bother me again by phone or in writing. Depending on your state laws if they continue you may be able to sue them (I try to not quote Federal law because while I don’t mind suing in Small Claims for damages I am not about to try it in Federal Court).
      As Thomas Bright said, be careful how you word things because you don’t want to imply the debt is valid or you have any intention to pay it in whole or part.

      • Thomas Bright

        Great points, Joe. Thanks for sharing your insight!

  • McCall Hazelton

    I think something that people don’t realize is like you said, you don’t have to talk to them. If you do owe someone money though, you can’t always just expect them to leave you alone. It’s best to talk with a lawyer, or a financial planner, and figure out a way where you can pay the debt if you owe one. Once the case is settled, then you should not have any more problems.

  • is it legal for a debt collector to keep re posting an old debt of 7-8 years as being new or just opened and pick any date they want just to harm you

  • If seven plus years of bad credit on your credit report and constant threats .. intimidation and harrassment are not paying it back or punishment .. i don’t know what is. Just like a prison term for someone who commits a crime. It damages your life in that you cannot get credit or if you do the interest rate is outrageous. And then for these extortioners to come back and repeat the process is wrong.

    • Thomas Bright

      You are absolutely right, Debbie.
      What’s worse is that some people don’t know any better and by falling for their tricks might have to pay or will at least open themselves up to being harassed again. Hopefully we can keep spreading the word and educating consumers so that they know their rights in these situations.

      Thanks for reading and commenting!

  • Mark Johnson

    They need to make a law against selling old debts to these “zombie debt” companies. It defeats the purpose of filing bankruptcy when that debt is shuffled around to other companies to constantly harass you all over again after months of being harassed by the original creditor.

    It just seems like a way to circumvent the law and continue to harass people who don’t have the money to pay it back.

    • Thomas Bright

      Agreed Mark. Hopefully one day we will have a little more legislation around this. Thanks for reading!

  • Morgan King

    I have a past client, who has recently received a collection notice from a tenth Debt Buyer! This account charged-off in 2001. No payment has been made since 2001. No lawsuit was ever filed against my client.
    In 2010, I called and spoke to this debt collector on the phone. This debt collector argued with me, and disagreed that the SOL had expired. Afterward, I prepared and mailed a letter on my client’s behalf, to that (ninth) debt collector. I explained how this debt is ‘time barred’, due to the SOL for a CA resident, and to cease and desist.
    Nothing was heard thereafter.
    This year, 2014, my client has received yet another collection notice, for the same account, but a new (tenth) debt buyer. I was shocked.
    Now, I have mailed the same type of letter to this debt buyer. I am very angry, and don’t know what else to do, except litigate.

    • Thomas Bright

      Wow! Thank you for sharing that experience with us. That is certainly frustrating for both you and the client, I’m sure. In this case, it’s great that the individual sought legal counsel, otherwise he or she may not know the rules in play here, and could have verbalized a commitment to pay or somehow otherwise reset the SOL. It’s amazing that it is being resold so many times. The profit margin must be virtually non-existent at this point.

      Thanks for stopping by and commenting!