Night of the Living Debt, or How Re-aged Bills Can Hurt You

No one likes to deal with debt. Borrowers don’t like to pay it and creditors and collectors don’t like to collect it. But debt is what makes our society work, as few people are able to pay cash. It’s not a problem most of the time, as the great majority of borrowers pay on time. Sometimes, those debts go unpaid, and when that happens, creditors notify the credit bureaus and the unpaid debts are noted on the borrower’s credit report. The notation will stay there until the debts are repaid, or until seven years go by, whichever comes first. After seven years, the debts, paid or not, disappear from the borrower’s credit report.

Sometimes, however, those debts come back, seemingly as if from the dead. If your debts go unpaid for a long enough period of time, your lender or creditor will ultimately write off the debt as a loss. They will then sell those debts to collection companies, often for pennies on the dollar. The collection companies try their best to collect some of the unpaid funds. If they get anything at all, they come out ahead. On event, those collection firms will report those debts to the credit bureaus as though those debts were new ones, instead of old, uncollected bills. Officially, doing so is known as “re-aging.” Unofficially, it’s known by the creepy moniker of “zombie debt.”

Zombie debt is illegal; debt is supposed to be reported to the credit bureaus only once. After seven years or repayment, those debts are supposed to be permanently gone. Collection agencies re-age the debt in order to put additional pressure on the borrower to repay. After all, having a new black mark appear on your credit report years after the fact will not make anyone happy. The agencies hope that debtors will be sufficiently scared by the new notation on their credit report to offer to settle the debt. In exchange, the collection firm will report the bill as paid, consequently removing the notation.

What can a consumer do about zombie debt? If you have proof that the bill has been paid, that more than seven years have elapsed or that the debts were discharged in bankruptcy court, you can submit proof to the credit bureaus. That should be sufficient to get them to remove the notation. If you fail to do so, you will have to persevere another seven years of bad credit and unfavorable loan terms unless you pay off the debt.

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