BALTIMORE — Carole Kelley got a letter out of the blue last year saying she owed nearly $1,200 on an unpaid credit card bill.
Kelley says she never had plastic from the card issuer listed. No such debt had appeared on her credit report when she bought a house three years earlier. Her credit monitoring service never turned up the debt. And the letter didn't use her current married name.
"So I called and they told me I owed it. I said, 'I don't understand this. What is this from? I can't even tell exactly where it began,' " says Kelley, a paralegal.
She pressed for answers and the situation turned ugly. The debt collector insisted that the debt was on her credit report and that she owed it. "I got off the phone very angry, just frustrated," she says. "They treat you like a piece of dirt."
Kelley suspects she's being haunted by zombie debt.
Zombie debt is an old debt that just won't die. It may be passed from one debt buyer to another, for years, until one day consumers are startled to find a collector demanding payment.
It may be debt that the consumer owes and has forgotten -- or hoped the creditor would forget about. But it also can be old bills that have been repaid, discharged in bankruptcy, racked up by an identity thief or belong to someone who shares the same name. Many times the details from the debt collector are so sketchy that consumers have no idea if they owe the money or not.
"Usually, the sign of a zombie debt is you can't figure out what it is. It's very old. It's often from someone whom you never had a contract with so the names won't be familiar," consumer lawyer Jane Santoni says. "You haven't heard anything for years and years and years. And then all of a sudden, it's back again. Well, where did it come from?"
Consumer and bankruptcy lawyers say zombie debt cases have grown along with the debt purchasing industry.
Debt purchasers have been around for a long time, but the savings and loan bailout in the mid-1980s took the industry to a new level. The government sold off huge portfolios of delinquent credit card debt to finance the bailout, spawning some of today's leading debt buyers, according to Kaulkin Ginsberg, a firm that advises debt buyers.
Now credit card issuers routinely package their uncollectibles and sell them to debt buyers for pennies on the dollar. Buyers take their turn at trying to collect and later might bundle uncollected debt to sell to another buyer. Debts may be sold again and again.
