What Is A Zombie Debt?

10 Feb What Is A Zombie Debt?

A zombie debt is a debt that is too old to be legally collected. When a debtor does not pay the original debt, the creditor will “charge-off” the debt. A “charge-off” is an accounting term, but does not stop liability for the debt.

After a period of time, the original creditor will transfer the debt to a debt collector for collection. The debt collector gets a percentage of the payments made by the debtor. If one debt collector doesn’t work, sometimes the creditor will try a second, or third, or fourth debt collector.

Bud Hibbs, a consumer protection advocate, provides examples of zombie debt collectors at his site and offers information on zombie debt collectors and how to fight back.

Other times, the creditor will sell the debt to a debt buyer. Then, the debt buyer will hire a debt collector if they are unable to collect the debt. The debt buyer will transfer the debt to a second or third or fourth debt collector.

All of those transfers take time. And over time, some collectors get more aggressive. The reason why the debt collector gets more aggressive is that each state has a statute of limitations on how long a debt is legally collectible.

For example, in Oregon, if the last payment on a debt occurred more than six years ago, that debt is no longer legally collectible. That means, the debt collector/buyer/original creditor can no longer use the legal system to collect the debt. It does not mean that the debt collector/buyer/creditor can’t TRY to continue to collect the debt. If they file suit before the six-year period, the debt collection can legally continue.

Sometimes, though, it has been more than six years. Sometimes, it has been 10 years since the last payment, and all of a sudden, the phone starts ringing and the zombies start crawling out of the woodwork; nasty phone calls start.

If a debt collector tries to collect on a old debt, a zombie debt, and files a lawsuit, that lawsuit is a violation of the Fair Debt Collection Practices Act. The debt collector is counting on the debtor ignoring the lawsuit, figuring that there is no way to fight a debt that old. A debt being harassed by a zombie debt collector should seek experienced legal counsel immediately. Fight back, take back your rights.

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I'm a consumer protection lawyer in Oregon, working with people in Klamath; Lake; Jackson; Josephine; Curry; and Deschutes County. I speak regularly on bankruptcy and consumer protection issues nationwide.

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