Money Facts Archive Get the real facts that will shape your future by having them delivered to your Inbox!

In general, zombie debt is debt which has been rendered uncollectible for any number of reasons; but is constantly being collected as if it was valid, current debt. Examples are credit card debt that was discharged in bankruptcy, credit card balances which have been charged off, or a debt that is non-collectable due to applicable statutes of limitation. Very often, this type of debt is purchased by companies that knowingly employ aggressive collection techniques to extract money from consumers to pay debts that are no longer valid. These companies frequently appeal to the original debtor's sense of moral obligation despite the fact that the debt is not legally collectable.

While legitimate, delinquent debt might be purchased from original creditors for 1 to 12 cents on the dollar (depending on the type of debt and its age); technically uncollectible 'zombie' debt might be purchased for just fractions of a cent per dollar!

Obviously, there are many unscrupulous collection agencies that could care less about the technical, legal status of an account because there is money to be made. In fact, bad debt collection is a multi-billion dollar industry and the big players make many millions of dollars of profit.

Despite major actions, lawsuits, and fines by the FTC (NCO Group paid a fine $1.5 million in 2004 for reporting false information to credit bureaus and the FTC obtained a $10.2 million judgment against National Check Control in 2005 for threatening consumers with lawsuits and jail for debts that weren't owed or were very inflated); the collection of zombie debt does not appear to be going away anytime soon.

So what can you do about it?

Throw the letters away and just hang up when these scavengers call.

Don't take the bait.

- Ed Smith, Publisher
The EHS Letter Manual