What is Zombie Debt?


Zombie debt is debt that won't die.


How Does Zombie Debt Work?


Let's say John Doe ran up a $10,000 credit card bill in his 20s. He works out an agreement with the credit card company, pays $2,000, and is told that the rest of the bill is discharged.


However, six years later, the credit card company sells the remaining $8,000 of debt to a collection agency, which begins calling John about payment. The debt has become zombie debt.


Why Does Zombie Debt Matter?


Zombie debt is very frustrating, and borrowers should never borrow money they can't pay back. Sometimes, borrowers have recourse on zombie debt, however. For instance, the state may set a statute of limitations that restricts how long a company has to collect a debt. Collection agencies must also provide written evidence to the borrower that the borrower indeed owes the money.

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Paul Tracy
Paul Tracy

Paul has been a respected figure in the financial markets for more than two decades. Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers.

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