We occasionally come across “zombie debts”, or debts that have come back from the dead. These zombie debts are frequently incurred during early life and come back to haunt you in later life, generally when you’re in a much different position such as wanting to settle down, getting married, buying a house, or having kids.
Zombie Debt, also known as phantom debt, basically means having a debt that refuses to go away. Maybe you thought it would go away, maybe you thought you had paid off your debt in full already, or maybe you miscalculated and the payment notices stopped. When these kinds of debts come back to haunt you, it’s best to be prepared and work out a solid plan fast.
Sometimes our clients have got a debt consolidation loan and have paid out their debts but haven’t closed the accounts. These accounts start to accrue fees and charges, mainly through having direct debits dishonouring repeatedly on these accounts. With no payments penalty, interest rates kick in and balances of zombie debts keeps increasing.
The second way zombie debts occur is when a creditor might sell, or “charge off”, its overdue debts to a debt collector who starts fresh collection activity. This might happen years after you thought it was dead and gone. Suddenly 10 years later, you’re getting calls, letters and legal action.
The statute of limitations on debt is six years, as long as certain conditions are met. Generally, if you haven’t heard from your creditors for six years, then the debts are gone. However, if you didn’t update your contact details with that creditor, then the statute of limitations doesn’t apply. The statute of limitations is 12 years if the creditors have successfully obtained a judgment for the debt.
There is a way to overcome the problem though, which is through these simple steps.
Assessing the damage is the first step to facing the problem at hand. Make a plan with the debts you have outstanding and figure out where you stand, what needs to be owed exactly and what budget you may have to follow to get the job done.
Harassment from debt collectors can be a major issue at this stage, to the point where creditors can sue you for unpaid debts from many moons ago. Learn your rights fast and stick to your guns. Creditors can’t control you, and there are many things you are entitled to and creditors are not allowed to do.
Send a letter within 30 days, once you’ve discovered your zombie debt, to your creditor. The creditor must then send back a validation notice, which will let you know exactly how much you owe and when by.
From here on out you can own your phantom debt and pay back exactly what you need to wipe the slate clean. Don’t let creditors know you’re struggling, and you can manage an easy plan to pay back the remaining debts in a safe way.
Check out our debt insights page for more information on how to combat debt safely.