Zombie Debt: What it is and what you need to know about it

For those of you that have an unpaid collection you may or may not be aware that the longest they can legally stay on your credit report is seven years from the date of default.

But you might not be aware of the amount of time that the collector has to sue you for that debt.  The time frame for this varies from state to state depending on which state you lived in at the time you incurred the debt. 

Having separate dates for two different actions such as credit reporting and sue able debt leaves many people with confusion over what methods are legal when attempting to collect these older debts.

There are several incorrect assumptions regarding these old debts commonly referred to as “Zombie Debts.”

  •  Debts can never be collected after they have been removed from your credit report

This is not true.   Credit reporting is voluntary so just because a collector may or may not be reporting on your credit report has no bearing on if the debt is valid or not.

  •  When a debt becomes time barred (past the limitations for a sue able debt in that state) it is not allowed to be reported on a credit report

This is not true. The amount of time a collection company can report to the credit reporting agencies is 7 years. State statues for sue able debt has nothing to do with this time frame.  You can have a debt that the creditor is no longer able to sue you for, based on the state you live in, but that will have nothing to do with it being legal to be reported on your credit report.

  • Making a payment on an old debt will reset the clock for how long it can stay on your credit report

This is not true.  Nothing you can do will reset the clock of how long a collection can stay on your creditreport.  The Fair Credit Reporting Act has very specific laws about this.  Seven years is the max a collection can stay on the report, regardless of payment or not(keep update on the world of credit). 

Even if the account is sold from one collection company to another, the date of first delinquency cannot legally change.  If an account is reported for longer than 7 years it needs to be disputed and deleted from the credit report.

  •        If you make a payment on a collection, you reset the clock and the company can now sue you for this debt

True.  Anytime you agree to new terms on the debt or make installment payments on the debt you are resetting the clock on that debt and giving the collector a fresh new time period to be able to try to sue you to collect the debt.

If you owe a collection in Colorado where the statue of limitations is 6 years, and that debt is 5 years old, many people falsely assume that if you start making payments on that debt it will somehow improve your credit score (See a few video’s on credit scores here). All you have done is given the collector a fresh new 6 years to be able sue you.

If you are wanting to pay your older collections I suggest you either pay them in full or settle them in full so you are not doing anything that can legally give the collector further recourse to sue you.

Author: Dan Beck

Dan Beck is a credit repair expert who teaches consumers how to create an "A Rated" credit profile. Would you like to receive a FREE Consultation with Dan? If so, click here.

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