Zombie Debt

You might think that this is a term out of some horror movie; you might be right but zombie debts can come back from the dead to haunt you.

The term refers to debts that you think are resolved, that are then sold to collecting agencies who then try and make you pay for the debt.

How they work

If you have a debt that you can’t pay and the debt gets ridden off. You might believe that this is the end of the debt, you could be mistaken. The debt might appear years later with interest and a collection agency demanding money.

The collection agency buys loads of bad debts in the hope that they can claim the money that you originally borrowed. They buy these debts because they can and do make money from people. If you had a bad debt in the past, but you have changed your life around you might then worry about the harm that this could do to your current credit file.

There are many ways that you can end up with a bad debt on your accounts, they can include:

• Bankruptcy
• Identity theft
• Unpaid debt that was written off

The collection agency buy these debts at a low rate, the banks or credit agencies are happy because they didn’t think they would re-coup any money, so some is better than none.

What you need to do

You need to be aware of your own rights, so that you are not misled into paying a debt that you legally don’t have to.

You must not claim or acknowledge that the debt is yours in the first place, it is important that you make the collection agency write to you. Only then can you see the information that they are claiming. If you were declared bankrupt you need to prove this with a discharge order. The collection agencies are not allowed to bully or threaten you in any way, which is one common tactic that many collection agencies employ.

What you need to know is the statute of limitations on any debt that has passed. This will mean that you are financially aware of what the collection agency can and can’t do.

What you don’t want to happen is to build up a great credit score and suddenly a collection agency comes out of the woodwork and start demanding money. Any issues could cause problems with your current credit situation; this can have a negative impact on your credit file. They can try and make a claim to be attached to your credit file and you will need to ask for these to be removed. It is possible to do this direct with the collection agency.

Get advice

If a collection agency does contact you with the threat of a zombie debt then it is important that you seek advice before answering them. This will mean that you are being financially smart and you will know your rights before you speak with them.

It can be a stressful time, which is why it is important that you take your time and get it right, because you don’t want to be liable for a zombie debt.