What is zombie debt?

Know what to do, if it comes after you.

When we think of zombie’s, we often think of watching scary movies at the box office. However, zombie debt is not only real, but alive and well. It is the kind of debt that consumers think is dead and gone, but actually comes back to life and the proof are persistent debt collectors. 

What is zombie debt? It might be any of the following: 

  • Previously settled debt: with a company or debt collector
  • Discharged debt from bankruptcy
  • Debts that no longer show on your credit report
  • Debts that are a result of identity theft
  • Time-barred debt that is past the statute of limitations

(Tip: There are many factors that affect the statute of limitations on time-barred debt including state law and the type of debt. To learn more visit the Federal Trade Commission. For assistance in identifying the statute of limitations on varying types of debt in your state, contact a legal aid lawyer or your State Attorney General’s Office.)

What should you do if zombie debt comes for you? The Federal Trade Commission suggests the following tips: 

  1. Make sure the debt is real and legitimate. Obtain a copy of your free credit reports (i.e. one from each credit bureau every twelve months) online, to see if the debt is listed. Be cautious of “fake debt collectors” and debt that may be a result of identity theft.
  2. Know your consumer rights. If you are approached about zombie debt you can ask the collector to send a written validation notice that specifies the amount owed and the creditor’s name.
  3. Respond to lawsuits filed by debt collectors. Be sure to respond in person or through your lawyer by the date specified in the court documents.
  4. Be cautious about “resetting the debt clock”. Consumers may not realize that if they make a payment or promise to make a payment on a time-barred debt, that statute of limitations may be reset and the collector could sue for the full debt amount including interest and fees! 

For additional resources on coping with debt visit the Federal Trade Commission or Michigan State University Extension

Michigan State University Extension offers financial literacy and homeownership workshops throughout the year to help you become financially healthy. For more information of classes in your area, please visit either the MSU Extension events page or MI Money Health website. Additionally, you can take the Financial Health Survey at MI Money Health to access if you’re financially healthy and discover more ways you can improve your financial health. 

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