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What is zombie debt?

You may have heard the phrase “zombie debt” used but are unsure of what it means or what it refers to. Often times, debts are sold by the original lender to a debt collection company for a fraction of what they are worth. That company, or any company it subsequently sells your debt to, then comes after you for the amount even though you though were unaware of the debt or the statute of limitations for collecting the debt has passed. Thus, these debts are given the moniker zombie debts since it is as if they have risen from beyond the grave to haunt you.

According to the Money Crashers, if six years have gone by with no activity related to a debt you may no longer be sued for that debt. The Fair Debt Collection Practices Act also provides that such debts be removed from your credit report after seven years of inactivity.

However, since these debt collection agencies are able to buy your debt so cheaply, they may come after you for it anyway in hopes that you will be duped into making a payment. On average, these companies are able to purchase old debts for only 3 percent of the actual value of the loan. So any amount that you give them will likely result in a tidy profit for them. Thus, they have a huge incentive to keep contacting you and many companies may even resort to harassing you with letters and phone calls.

If you are a contacted about a debt that you thought had been written off or is beyond the statute of limitations, you may want to respond to the company in writing requesting proof that the debt belongs to you. Even if they do provide such proof, however, they cannot pursue any legal action against you once the statute of limitations has run. Therefore, your best bet may be to do nothing at all.

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