What Is Zombie Debt?

(Last Updated On: November 11, 2019)

What Is Zombie Debt?

Zombie debt. It’s frustrating, sad, and quite frankly, pretty scary. So what exactly is zombie debt? How is it defined? And how does it impact you?

Zombie Debt Defined

“Zombie debt” is used to describe debt that is very old or no longer owed, but that can still come back from the dead to haunt you.

Obviously, it’s not like your debt ever really had a life. But with American consumer debt on what looks to be an unstoppable rise, zombie debt is becoming all the more relevant. The shadow of debt hangs over today’s younger generations like an impenetrable fog, and many are dreaming about days when they can be worth just zero dollars. What a world we live in when people are celebrating not being worth negative money.

But the point is, debt sucks, especially when those who profit off of it do so by predatory means. So if debt sucks, lifting that veil can be a life changing event for some. Not having debt anymore after having it is great.

We’re building it up so maybe you’ll get an idea of how terrifying zombie debt it. Because it’s literally debt that you could have paid off already that’s come back to terrorize you. In fairness, zombie debt can also be debt that has “expired.” After some amount of years, unpaid debt can essentially pass a statute of limitations, wherein you’re no longer legally required to pay it off.

We’re not saying you should just put off paying your debts though, that could land you in some other hot water. We highly advise you read the terms and agreements you personally have. 

How Does Zombie Debt Work?

You might be wondering how you can have to pay debt you already paid off. That’s like ordering the most expensive steak at your local steakhouse, not getting the steak, and then being charged twice. Then the chef turns out to be a debt collector and they take your house.

So how exactly does debt come back to haunt you? Well you can thank debt scavengers. They’re as terrible as the name sounds. They also do exactly what they name implies. 

A debt scavenger will go up to someone who is owed debt–oftentimes this debt is uncollectible. It has either passed its statute of limitations or the probability of the owing-party paying the debt back is super low. So a debt scavenger will pay the one owed maybe 1% of what the debt is and move on with their lives. The one owed wins because they’ve already considered the money a loss. Debt scavengers then go and try to collect on the debt they just bought in full. Most of the time they only get a bit though.

Because the scavengers buy debt for literal pennies on the dollar, even if they’re only able to collect on say 10% of the debt, the profit margin is still huge. So the scavengers also win. Guess who loses? Yeah the one who owes debt.

What Debts do Scavengers Like?

Debt scavengers have fined tuned their morally reprehensible art to a science, so it’s no surprise that there are specific debts scavengers prefer. 

First off is debt where the statute of limitations has expired. Basically, this is debt that has existed for so long it is no longer legally required to pay it back. How long this is depends on your state laws and whatnot, but the point is you do not legally have to pay it.

Second off is in the same vein as the first one. Debt scavengers love debt that has already been forgiven to bankruptcy. We don’t really have to explain why you don’t have to pay it back, but it’s safe to say that you don’t. Because it’s been forgiven.

Third is the strangest one. Sometimes you’ll see debt scavengers try to collect on debt that is not yours. We should not have to explain why you do not have to pay debt that is not yours. This can be the result of database issues or identity theft. Essentially the scavengers are exploiting another corporation’s mistake to your disadvantage.

Do You Have to Pay Zombie Debt?

Generally speaking, no. Debt scavengers are able to pay so little for debts because they’re already deemed uncollectible. It’s like buying a condemned house and then reselling it for its original value. 

Here’s where it gets bad for you. If you pay back some debt that is past its statute of limitations, you reset them. So you can go from never having to pay the debt back, to throwing a dollar at it, and now you owe your entire debt again. 

Before you ask, yes, debt scavengers exploit the crap out of this. They will bug you incessantly before telling you “hey, if you pay back just a tiny amount of this debt, we’ll leave you alone.” Then you give that tiny amount, which resets the statute of limitations. Once those limitations have reset, you’re obligated to pay back the debts. Your credit score is tanked, and now the scavenger can sue you and win. Forcing you to pay them even more money for court fees and the like. 

So if your old debts ever come back from the grave, you should always make sure you know where the money is going. Whenever you’re paying off zombie debt, you’re not actually paying money to the person who originally owed it to. You’re paying it to some corporation you’ve probably never even heard of. 

Sadly, there’s no “it gets better” or “it’s getting better” that we really know of. In fact, it gets worse.

Zombie Debt gets Worse

That’s right, not only is it not getting better, it’s getting worse. 

Because the government is involved. 

That’s right, the federal government oftentimes operates as a debt scavenger

They’ll send you debt that they say is some 20 years old, and if you don’t pay it back in 90 days, you’re screwed. Except they meant 90 days 20 years ago. You’ve never heard of this debt, so of course, you’re going to try and set up some kind of administrative review. There’s no way the government can make you pay this off, right?

Except they can, because you’ll have to find evidence that you don’t owe this debt. We guess it’s time to dig up every receipt you ever had 20 years ago? Fine, let’s say you did that. Now you’re arguing your case in front of the administrative judge. You’ve got your receipts, you’ve got your evidence. You’re ready. 

Except for one small thing. 

It’s actually a really big thing. 

Because the judge you’re arguing to? Yeah, they work for the same agency that said you owed the debt in the first place. 

There’s more too, like how this system is genius in its setup, targeting the poorest families to bleed them dry of money they’re barely using to feed themselves. How the debt is often a miscalculation, and never legitimate. How often people are tricked into paying it back. And how there are protections against zombie debt, but conveniently, the government doesn’t have to abide by those protects when they’re collecting.

It’s devastating to those it hits, and when the government is involved, you may as well be up the worst creek with no paddle. 

The horrors of living in a society where you are a profit margin suck. So here’s some mental cleansing for you. Baby animals!

About the Author:

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Kyler is a content writer at Sporcle living in Seattle, and is currently studying at the University of Washington School of Law. He's been writing for Sporcle since 2019; sometimes the blog is an excellent platform to answer random personal questions he has about the world. Most of his free time is spent drinking black coffee like water.