Zombie Debt

In a lot of cases, credit card debt occurs because a person has simply spent too much of their money. However, not all credit card debt is your fault. Some people unknowingly become the victims of identity theft. Thieves get a hold of their personal information, charge hundreds or thousands of dollars on their credit card (or perhaps use the information to open an account in the person's name and then charge on that) and aren't caught. Once the theft victim has found out about what has happened and has reported the theft, they assume that they're in the clear. The debt that occurred because of identity theft is forgiven. Or is it?

Zombie debt refers to debt caused by another party that is seemingly forgiven, but then comes back to haunt the innocent individual to which the debt is supposedly attributed to. It's something that can wreck lives and hurt credit scores. In this article, we'll be going over how it happens and how you can end it.

How Zombie Debt Occurs

Credit card companies who cannot collect on debt (this can be debt by deadbeats or debt caused by identity theft) will hang on to the debt record for a while. Eventually, usually after 5-10 years, they'll sell this information. Collection agencies will buy this information for mere pennies on the dollar. They then take the information and try to collect on the unpaid debt.

Why Zombie Debt Occurs

Zombie debt is quite profitable. Collection agencies can buy unpaid debt information for up to 12 cents on the dollar. Since most unpaid debt ranges from $500-$5000, there is a lot of money to be made. Even if the collection agency is only able to collect on 25% of the debt, that's still a huge return on their initial investment of pennies on the dollar.

The evidence of the effect that zombie debt has on collection agencies is very easy to see. Over the past 5 years, debt collection companies have seen their profits increase considerably. What was once unprofitable (collecting on old debts) is now a nearly billion dollar a year industry. The collection agency business is definitely booming.

Things might be great for collection agencies, but it isn't so good for the customers who are having to deal with the effects of zombie debt. They are left with potential lawsuits (if the statute of limitations hasn't passed), harrassing phone calls and potential damage to their credit report. It is a huge hassle for them.

What Happens

After buying the information, the collection agency will then attempt to collect on the debt—even if the statute of limitations has passed. They will begin calling the person to whom the debt is attributed and will begin asking for money.

Collection agency workers are trained to get the money at all costs. They often resort to harrassment in order to get the money. They will verbally abuse customers and make false promises, just to get the money. There are many abuses collection agency workers are capable of, some of which are listed below.

• Demanding money from the customer, even if the debt has been legally forgiven or paid off. Collection agencies will demand money they shouldn't be demanding in the first place. They may threaten lawsuits in this case.
• Verbal abuse. Some collectors will verbally assault people. This is, of course, against the law, but collectors still do it anyway because it intimidates people into paying money they really shouldn't have to pay.
• Illegally “Renewing” Debt. Collectors will try to tell the credit bureaus that a debt is brand new, even if it is, in fact, several years old. They do this so that they can have more time in the statute of limitations to demand repayment of the debt.
• “Fixing” Credit Record. Many people have reported collectors who will call and state they can remove a negative record from your credit report in exchange for payment of the debt. This is something that is completely untrue and can even revive the debt and lead to lawsuits.