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 latter life, generally when you’re in a much different position (wanting to settle down, get married, buy a house, or have kids).
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 latter, 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 CONTINUOUS 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.
Zombie debts don’t go away unless you pay them. Just like zombies keep coming back to life in horror films, old debts can too, so make sure that your old debts are dead and CLOSE THE ACCOUNTS!