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Zombie Debt

How Do Debt Scavengers Collect Zombie Debt?

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Zombie Debt: Is Your Past Debt Coming Back to Haunt You?

Are debt collectors harassing you about old debts? While you could swear that you’ve settled them, the collectors insist that you still owe them money. We’ll call these past debts “zombie debts” because they’re coming back to haunt you; the debt collectors are really just “debt scavengers” because of how they rummage for anything usable from old scraps.

Zombie debt can be intimidating, and debt scavengers can trick you into paying money that you might not even owe anymore. However, once you know what tactics they use, you can avoid their harassment and protect yourself. First, you’ll need a clearer understanding of what zombie debt is.

Generally, zombie debts are old debts that collectors revive. These are debts that you thought could not impact you. Most of the kinds of debts that can become zombie debt include:

  • Discharged Debts: Debts that you no longer are responsible for paying back after going through bankruptcy.

  • Settled Debts: Debts that you have negotiated with your original creditor to pay less than the original amount you owed.

  • Time-Barred Debts: Expired debts that have gone beyond the statute of limitations, the period when a debt collector can sue for unpaid debt.

  • Other People’s Debts: Debts that might belong to someone with a name similar to yours or debts that result from identity theft.

Why Does Zombie Debt Exist?

Zombie debt comes from debt scavengers. These debt collectors purchase old debts from other debt collectors or from the original creditors. They only pay for pennies on the dollar when buying old debts, and they then get money when a person unwittingly pays a debt they do not owe. In essence, debt collectors bring zombie debts back to life to make profits.

How Do Debt Scavengers Collect Zombie Debt?

Debt scavengers use sneaky tactics to get you to pay a zombie debt. They usually call about debts that have gone beyond their statute of limitations. Their primary goal is to get you to pay any amount of money on an old debt.

Regardless of how small or large the amount you pay, paying will reset the statute of limitations, which will make them legally able to sue you to collect the entire amount of debt. Watch out for the following common tactics that these collectors use to get you to pay old debts:

  • Say They Only Need a Small Amount: Zombie debt collectors might swear to leave you alone once they get a small, harmless amount of money. However, since that action resents the timer on when they can sue you for the full amount, you can expect to see them again in the future.

  • Verbal Harassment: Some debt collectors can be aggressive with their tactics and display verbally abusive behavior. They would resort to using offensive language, pressuring consumers to pay up. Scared consumers who just want the debt collectors to leave might end up satisfying the scavenger’s goal.

  • Threaten to Sue: Debt scavengers could take advantage of your lack of knowledge about time-barred debts. Some people might get worried about the possibility of getting sued. Thus, they end up paying an amount just to avoid trouble. However, if the debt in question is expired, know that this tactic is illegal.

  • Report Old Debt as New: Another illegal tactic is when debt scavengers re-age debts, meaning that they report old debts as new delinquencies. Most negative debts can stay on a credit report for seven years. When debt collectors purchase old debts, they could report them, forcing them to show up on a credit report.

  • Pretend to be a Litigation Firm: Zombie debt collectors might contact you claiming to be lawyers. They convince consumers that they are only enacting the law by collecting owed debts. This tactic might also scare consumers into paying up because they believe the collectors are ready to file lawsuits.

Essentially, debt scavengers use scare tactics to get consumers to pay up. Know that the collectors themselves cannot challenge you in court regarding your old debts. Still, they can contact you about them and trick you into doing things that work in their favor.

How to Protect Yourself Against Zombie Debt Collectors

Protecting yourself against debt scavengers centers around knowing your balances and standing your ground. These collectors take advantage of the fact that the debts they attempt to collect are old. They hope that you have already forgotten about them. As such, keeping a record of all important documents truly comes in handy in these cases.

Gather all the facts you have about the zombie debt that collectors claim you still owe. Have all proofs of payment and any document related to your debt’s history. Having hard evidence on any account can help prove that you no longer owe the old debts. Plus, they can help defend you against lawsuits, should it come to that point.

When a zombie debt collector contacts you about old debt, be sure to request a debt validation letter. Compare the details in the letter they give with the facts you have on hand. See if it claims that the debt remains in the statute of limitations and they are allowed to collect the full amount. If it has expired according to your files, you should be safe. You can take action from there.

Hiring a lawyer is the best action you can take against zombie debt collectors. With legal advice from true lawyers, you have a better fighting chance against debt scavengers who only pretend to know the law. Consider speaking to an attorney and discussing your situation.

Conclusion

Zombie debt is old debt that debt scavengers bring back to life for a chance of making profits. These collectors purchase debt from original creditors and attempt to reset the statute of limitations. With a reopened statute of limitations, they can legally sue you for the full amount of debt that you have already settled.

Debt collectors take advantage of your lack of knowledge and use scare tactics to get you to do their bidding. So, be sure to have organized files of anything to do with your debts. These documents can serve as your defense. At the same time, consider getting an attorney represent your best interests when facing zombie debt. These experts can make sure that your accounts are in order so you don’t fall victim to zombie debt collectors.

About the Author

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Rick Munster

Rick Munster is a personal finance expert and author with over 21 years of experience in the credit counseling industry. He currently serves on the board of directors for the Financial Counseling Association of America and has written over 200 articles on personal finance. Rick's expertise has been recognized by several prominent online organizations, which have quoted him on issues related to credit counseling, debt management, and financial education. With more than 20 years of experience at Money Fit, a non-profit credit counseling organization, Rick has established himself as a trusted authority in the field of personal finance.
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Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
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Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

Rental, Fair Housing, Predatory Lending / HOEPA, Post-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. credit, budgeting, homeless prevention, debt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

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Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

Rental, Fair Housing, Predatory Lending / HOEPA, Post-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. credit, budgeting, homeless prevention, debt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).