Phantom Debt and the 2008 Financial Crisis
Bloomberg had a great article about Phantom debt sometimes called Zombie debt that’s really starting to be a problem. What does this mean? Well, there were a lot of debts that happened from the financial crisis in 2008 that were never cleared off, and a lot of people thought they were cleared because they saw charge off on their credit report or write off on a letter from the bank or they got a tax notice that they owe taxes on the debt that was written off. It may just be that you didn’t hear from this creditor for a long time, so you think the debt is gone.

Resurgence of Old Debts
Now that the economy is better, there’s inflation, home prices are up, and a lot of these debts are starting to show back up from collection agencies, from debt collectors that are contacting people saying, “Hey, you owe this money plus interest, plus penalties, plus late fees. Give us the money, or we’re going to take your house. Give us the money, or we’re going to take your payroll or we’re going to repossess your car.”

Verifying and Clearing Debts
Even if you haven’t heard from anybody, verify it’s cleared or you get a lien release on that debt to make sure that it’s not going to take your money today. Remember, a charge off or write off on your credit report or having it fall off your credit report isn’t the same as having it be released. A lot of times, a charge off has to happen because the lender can’t keep it on their balance sheet. Sometimes the credit reports automatically take stuff off after seven years, but that doesn’t mean the debt is gone; it just means it doesn’t show on your credit.

Avoiding Zombie Debt
If you do have an older debt that you’re worried about, make sure it doesn’t turn into zombie debt. Phantom debt means something that is invisible; zombie debt is like a zombie that’s coming to try to take you and take your money. Make sure it doesn’t turn into a zombie debt that is starting to garnish your paycheck or take your house or repossess your car.