Zombie Debt

AAA

DEFINITION of 'Zombie Debt '

A type of bad debt that is so old a person may have forgotten he or she owed it in the first place. The debt has likely been given up on by the company to which it was owed. Zombie debt can haunt a debtor if a debt collector buys the debt for a low price from the company in attempt to recover the owed funds.

INVESTOPEDIA EXPLAINS 'Zombie Debt '

If someone is being hounded by debt collectors for zombie debts that were either already paid off or were never incurred, action can be taken. Under the Fair Debt Collection Practices Act, a person can write a letter to debt collectors asking them to stop. At that point, debt collectors can contact the debtor only to notify him or her that they will cease or take a specific action.

Note that if you do owe money, the debt collectors can still take you to court to recover the funds, assuming that the time period from the last payment has not exceeded the juristiction's statute of limitations.

VIDEO

Loading the player...
RELATED TERMS
  1. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  2. Fair Debt Collection Practices ...

    A Federal law that limits the behavior and actions of debt collectors ...
  3. Junior Debt

    Junior debt is debt that is either unsecured or has a lower priority ...
  4. Debt Rescheduling

    A practice that involves restructuring the terms of an existing ...
  5. Bad Debt

    A debt that is not collectible and therefore worthless to the ...
  6. Allowance For Bad Debt

    A valuation account used to estimate the portion of a bank's ...
RELATED FAQS
  1. Who bears the risk of bad debts in securitization?

    Bad debts arise when borrowers default on their loans. This is one of the primary risks associated with securitized assets, ... Read Full Answer >>
  2. What happens if a company doesn't think it will collect on some of its receivables?

    The accounts receivable account, or receivables for short, is created when a company extends credit to a customer based on ... Read Full Answer >>
  3. What is the difference between compounding interest and simple interest?

    Interest is the cost of borrowing money, where the borrower pays a fee to the owner for using the owner's money. The interest ... Read Full Answer >>
  4. How do I get a higher limit on my credit cards?

    Before applying for a higher credit limit, it is important to demonstrate responsibility. One way to do this is by making ... Read Full Answer >>
  5. When does Q4 start and finish?

    Most companies such as Facebook have financial years that end on December 31st. For these companies, the fourth quarter begins ... Read Full Answer >>
  6. What are the pros and cons of getting installment credit to pay off your revolving ...

    Whether it is to finance big-ticket items, cover unplanned emergency expenses or provide a monetary cushion when cash flow ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  2. Active Trading

    Sorting Out Cult Stocks

    Is that crazy product going to be the next big thing? Learn how to evaluate these companies here.
  3. Personal Finance

    Dawn Of The Zombie Debt

    Are old debts coming back to haunt you? We'll show you how to keep these zombies from eating you alive.
  4. Investing

    Chasing Down Biotech Zombie Stocks

    Find out whether you have "living dead" stocks lurking in your portfolio.
  5. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  6. Economics

    Explaining Cash On Delivery

    Cash on delivery, also referred to as COD, is a method of shipping goods to buyers who do not have credit terms with the seller.
  7. Fundamental Analysis

    Understanding the Simple Random Sample

    A simple random sample is a subset of a statistical population in which each member of the subset has an equal probability of being chosen.
  8. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  9. Economics

    Understanding Economic Order Quantity

    Economic order quantity is an inventory-related equation that determines the optimum order quantity that a company should hold in its inventory.
  10. Economics

    What is Net Margin?

    The ratio of net profits to revenues for a company that shows how much of each dollar earned by the company is translated into profits.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center