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

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 Expense

    An entry found on a business's income statement that represents ...
  6. Allowance For Bad Debt

    A valuation account used to estimate the portion of a bank's ...
Related Articles
  1. Haunting Wall Street: The Halloween ...
    Options & Futures

    Haunting Wall Street: The Halloween ...

  2. Sorting Out Cult Stocks
    Active Trading

    Sorting Out Cult Stocks

  3. Who bears the risk of bad debts in securitization?
    Investing

    Who bears the risk of bad debts in securitization?

  4. Chasing Down Biotech Zombie Stocks
    Investing

    Chasing Down Biotech Zombie Stocks

Hot Definitions
  1. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  2. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  3. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  4. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  5. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
  6. Earnings Multiplier

    An adjustment made to a company's P/E ratio that takes into account current interest rates. The earnings multiplier is used ...
Trading Center