Home Finance Avoiding the Terrors of Zombie Debt

Avoiding the Terrors of Zombie Debt


The more conveniences and luxuries available to a society, the higher the likelihood people will live beyond their means and accumulate debt. This is certainly the case in the United States, where 38 percent of households carry revolving credit card debt at an average balance of over $5,000.

What’s also rising is the number of delinquent accounts, defined as 30 days lapsing without a debtor making at least a minimum payment, increased from 2.49 percent to 2.54 percent as of 2018 Q4, per the Federal Reserve. The change is minor, but it brings to mind thoughts of zombie debt, and how many debtors in the U.S. might have it.

What Is Zombie Debt?

Zombie debt is time-barred debt, or debt that is past the statute of limitations. This means a creditor or debt collector can’t sue a debtor over an outstanding balance. “Zombie” comes into play because the debt can still follow a debtor, it’s just not alive…if you can prove it.

You Still Owe Money

No matter how long a debtor has carried a balance, they still owe it. This is an important fact for debtors to know as they deal with old balances. There’s nothing stopping creditors or debt collectors from going after a debt. The more time that has passed makes it less likely that they’ll pursue a balance, according to Freedom Debt Relief reviews. However, it also depends on the creditor or debt collector, the type of debt, and the size of the balance. A $1,200 medical bill doesn’t carry the same priority as a $30,000 credit card balance.

Handling Creditor and Collection Calls

If your debt has a chance of being a zombie, you’ve undoubtedly dealt with your fair share of collection calls and late payment mail. How have those interactions gone? If you’ve ever agreed to pay some of your balance or have contributed money towards it, the statute of limitations resets to that date.

Do You Have Records?

If at least a few years have passed since you’ve last made a payment on a balance, it’s a very real possibility that you could be protected under a statute of limitations. But even if your debt qualifies, the burden of proof is on you should get sued. Courts don’t keep track of consumer financial behavior. If you have a paper trail of payments or can go back through an online account to take screenshots, that’ll prove how much time has elapsed.

In addition to being able to verify the date of your last payment, it helps to have access to the original clause or terms of the debt. It’s possible that the statute of limitations in the contract is different than the one you live in or where your creditor resides. Since many debtors don’t have access to this information, it’s difficult to know for sure if a statute offers protection from legal events.

What Is the Statute of Limitation on Your Debt?

If you’ve kept good records, you can find out if your debt is defunct very quickly. The three things that determine your fate are the state the debt applies to, the type of debt it is, and the contract signed.

The Balance breaks down the categories of debt as oral agreements, written contracts, promissory notes, and open-ended accounts. Promissory notes could be student loans and mortgages. Open accounts may be credit cards. They also list the statute of limitations for every state and type of debt.

If you live in Louisiana or Kentucky, Rhode Island, Wyoming, you might be in trouble. These states have the longest collective statute of limitations across the four different types of debts. The good news is that if you have credit card debt, there’s a good chance you’re in the clear. Half of all states have a statute of limitations of either three or four years for open-ended accounts. The majority of remaining states mandate statutes from 5–6 years. If you have a debt pertaining to Wyoming (8 years) or Rhode Island (10 years), I’m sorry to say that it’s probably alive and well.

Zombie debt can come back to bite us if we’re not careful. Treating creditor and collection interactions with caution, keeping detailed records of accounts, and knowing the statute of limitations on any outstanding balances helps us to avoid the terrors of zombie debt.