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Zombie debt is old, settled, or long-forgotten debt that has suddenly come back to life and is now threatening to wreak havoc on your finances. These debts are often purchased on the cheap by third party debt collection agencies, who then try to collect on them by scaring or tricking unsuspecting consumers into paying up.

While zombie debt can, indeed, be scary, you don’t necessarily have to pay anything to make it go away. In many cases, zombie debt has already been settled or is too “old” to be collectible. It’s also possible the debt doesn’t even belong to you but has your name attached due to an error or identity theft. Here’s what to do if a collector is hounding you for an old or unfamiliar debt.

Zombie Debt Definition

Zombie debt is generally defined as debt that is more than three years old that has either been settled, forgotten about, or belonged to someone else. While a debt collector is allowed to contact you about this debt, they are not allowed to harass you.

If a zombie debt collector contacts you about a debt that has expired or already been paid or settled, you do not need to pay it, and they cannot take you to court to collect the money.

Types of Zombie Debts

Zombie debts often fall into the following categories:

Settled Debts

If you’ve filed Chapter 7 bankruptcy, some of your debts might have been discharged, which means you’re no longer on the hook for paying them back. If a debt is settled, you should have a written agreement that makes it clear you’re no longer legally liable for the debt.

Recommended: Getting Approved for a Personal Loan After Bankruptcy

Debt That Isn’t Yours

Debt that a scammer racked up under your name (by stealing your identity) can come back to haunt you as zombie debt, even though it doesn’t really belong to you. It’s also possible for a collection agency to mistakenly think a certain debt is yours and be going after you due to an error.

Time-Barred Debt

In many states, there is a statute of limitations on debt (with the exception of federal student loans). This means that, after a certain time frame, a collector can no longer take legal action to collect the debt. The exact time limit will depend on a number of factors, including the state law that’s noted in your credit agreement and the type of debt it is (such as credit card debt, a car loan, a personal loan, etc.) but it’s typically three to six years.

Depending on the state, the statute of limitations period may begin once the first required payment is missed, or it might start from the point when the most recent payment was made, even if that payment was made during collection.

It’s important to note that even if a debt is past its statute of limitations, making any type of payment or acknowledging you owe an old debt can restart the clock.

Debt That’s Fallen Off Your Credit Reports

Negative items on your credit report, such as a late payment or a debt in collection, can stay there for up to seven years. After that, the debt falls off your reports. If, however, you make (or agree to make) a payment on an expired debt, the debt collection agency can report the debt to the credit bureaus, resetting the seven-year clock.

How Does Zombie Debt Work?

Zombie debt is typically older debt. Generally, the original creditor has given up and sold the debt to a third party collection agency. These agencies often buy up zombie debts in bulk for pennies on the dollar. Even if the debt is past the statute of limitations and they cannot legally collect, they will often still try in the hopes that some consumers will pay out of fear. It’s essentially a numbers game — even if just a few people pay something, the business model can be profitable.

Some tactics that these collectors will use include:

•   Telling you that if you make a partial payment, they will leave you alone

•   Calling themselves a “litigation firm”

•   Threatening to take you to court if you don’t pay

•   Harassing you with excessive calls and verbal abuse

If you’re on the receiving end of a zombie debt collection, you’ll want to be careful. There is no upside in paying anything on a debt that is past the statute of limitations. In fact, doing so can restart the clock and make it possible for a collector to sue you for the debt and put it back on your credit report.

Recommended: What to Know About Debt Settlement Companies

How to Deal with Zombie Debt Collectors

If a debt collector contacts you about a debt you don’t remember or thought was settled long ago, here are some steps to take.

•   Verify it’s a legitimate debt. By law, a collector has to give you details about the debt, either when they first communicate with you or within five days of the first contact. These details must include the name of the creditor you owe it to and how much money you owe (written out to include interest, fees, payments, and credits). If they don’t, you’ll want to request a debt validation letter. It’s also a good idea to get a free copy of your credit report at AnnualCreditReport.com to see if the debt is listed there.

•   Follow up on suspected identity theft. If you believe that your zombie debt is a result of identity theft, you’ll find tips and sample letters to help you dispute it at IdentityTheft.gov.

•   Know your rights. No matter where you live or the form of debt, you have rights. Under the Fair Debt Collection Practices Act (FDCPA), zombie debt collectors are allowed to reach out to you, but they are not allowed to do the following:

◦   Contact you before 8 a.m. or after 9 p.m. without your consent

◦   Reach out to you at work if you’ve requested they stop

◦   Contact you via text or email, or DM you on social media if you’ve asked them to stop

◦   Call more than seven times within a seven-day period

•   Don’t ignore lawsuits. If a debt collector files a lawsuit against you to collect a zombie debt, it’s important that you respond to the lawsuit, either personally or through your lawyer, by the date specified in the court papers to preserve your rights.

•   Don’t accidentally reset the clock. If you make — or even agree to make — a payment on a time-barred debt, the statute of limitations clock may reset. If that happens, the collector can then sue you for the full debt amount, plus interest and fees. Also be wary of collectors that ask if you want to enroll in a “Fresh Start Program,” as this can also reset the clock on the debt.

•   Dispute the debt if it’s not legitimate. If the debt is not something you legitimately owe (say, it has already been settled, is time-barred, or is not yours), you’ll want to send a dispute letter explaining why you do not owe the debt, ideally via certified mail. The Consumer Financial Protection Bureau offers sample letters that you can use as a guide.

•   Negotiate if you do owe. If the debt in collection is legitimate and you do need to pay it, consider negotiating with the collector for a reduced amount. If they agree, be sure to get the new terms in writing (in case the debt comes back to haunt you — yet again — in the future).

Protecting Yourself from Zombie Debt

To prevent any of your current debts from becoming zombie debts, you’ll want to be sure to make all of your payments on time and in full and keep records of your payment history. If you have multiple high-interest debts and are finding it difficult to keep up with payments, you might consider getting a debt consolidation loan, ideally at a lower interest rate.

Other debt payoff strategies include getting a no-interest balance transfer card, paying off the most expensive debts first (known as the avalanche payoff method), and negotiating interest rates and payment terms with your lender.

The Takeaway

Zombie debt can rise from the grave to haunt you, but you don’t have to head for the hills or hide in fear. When you know your rights, you can protect yourself against old or expired debt that collectors are trying to cash in on.

Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. Checking your rate takes just a minute.

FAQs

Can you ignore zombie debts?

Ignoring zombie debts, which are old debts that have resurfaced, is generally not a good idea. While these debts may be past the statute of limitations, debt collectors can still attempt to collect them. Ignoring their attempts can lead to persistent harassment and, if the debt is legitimate, potential legal action.

A better route is to ask for a verification letter that includes all of the details of the debt. If the debt has timed out or is not actually yours, you can inform the collector in writing and request that they no longer contact you.

How can zombie debt collectors legally contact you?

Zombie debt collectors can legally contact you via phone call, letter, email, and even text messages. However, the Fair Debt Collection Practices Act (FDCPA) regulates these communications, requiring collectors to respect certain boundaries. For example, they cannot contact you early in the morning or late at night and are not allowed to harass you. They must also identify themselves and provide information about the debt.

What is the zombie debt statute of limitations?

The statute of limitations for zombie debts varies by state and type of debt but often ranges from three to six years. This period defines how long a creditor or debt collector has to file a lawsuit to collect a debt. Once the statute of limitations expires, the debt becomes time-barred, meaning the collector can no longer sue you to collect it. That said, the debt still exists, and collectors can still attempt to recover it through other means, such as phone calls or letters. It’s important to verify the specific statute of limitations in your state.

Photo credit: iStock/skynesher

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Saving money can help you to feel more in control of your finances and your life. When you have cash stashed away, you know you are prepared for financial emergencies and can also be working toward your short-term goals (like planning a wedding) or long-term ones, like retirement.

Often, though, saving happens gradually, like a slow drip. But there are people who want to save more aggressively, or there could be a moment in your life that spurs you on to accrue as much money quickly as you can.

If you’re interested in how to aggressively save money, there are smart strategies to help you do just that. Implementing an aggressive savings budget takes a certain amount of commitment, since you may need to make some significant lifestyle changes. That can be worth it, however, if the payoff is watching your money grow faster.

What Is an Aggressive Savings Plan?

An aggressive savings plan is a blueprint for setting aside a sizable amount of your income, typically over a fairly short time period. A 30-year-old who’s hoping to retire by 40, for example, might utilize an aggressive savings plan to save and invest 50% or 60% of their take-home pay over a period of 10 years to reach their goal.

For perspective, the personal savings rate in the U.S. was 3.4%, as of June 2024. That is the percentage of disposable income that citizens are socking away, whether in a savings account or a retirement fund. So the vast majority of people aren’t saving aggressively on a regular basis. Taking an aggressive approach to savings is something you might consider only if you have a specific goal you’re interested in achieving with your money.

Why an Aggressive Savings Plan Can Be Beneficial

Following an aggressive savings budget takes financial discipline, and it may not be right for every person or every financial situation. If you can stick with an aggressive savings plan, however, there are some tangible benefits you might be able to reap.

Here’s why an aggressive savings plan can work in your favor:

•   You can set aside money for large or small goals.

•   Reaching your savings goals can take less time.

•   Saving money becomes a habit.

•   You can learn to manage money better.

•   It becomes easier to learn to live on less.

•   You can avoid debt when you’re focused on saving vs. spending.

•   It teaches you how to prioritize needs vs. wants.

Saving aggressively can become a lifestyle if you’re able to accustom yourself to spending less. But even if you only apply an aggressive savings plan for a few months, you might be surprised at just how much money you can set aside.

Whether you follow a turbocharged savings plan for a short or long time, it can definitely improve your financial status and even be a form of financial self-care, since you’re likely avoiding debt and improving your money mindset.

Tips for Building an Aggressive Savings Plan

There’s no single strategy for how to save aggressively; instead, there are numerous steps you can take to shape your savings plan. If you’d like to stop overspending money and start saving instead, these tips can help you get your finances on the right track.

1. Paying Yourself First

“Pay yourself first” is an often-repeated piece of personal finance advice. It simply means that you should set some of your paychecks aside for saving before doing anything else. The good news is that paying yourself first is relatively easy to do.

Some of the ways you can pay yourself first include:

•   Contributing part of your salary to your 401k at work

•   Scheduling recurring transfers from checking to savings each payday

•   Using direct deposit to route payments directly to savings and bypass checking.

Paying yourself first ensures that money makes it to savings, rather than being spent. If you’ve struggled with sticking to a savings habit, adopting this mentality can make it easier to stay the course.

2. Getting Out of Debt

Debt can be a significant obstacle to saving money. If you’re spending hundreds or even thousands of dollars paying off credit cards, student loans, or other debts each month, you might have very little left to save.

Getting rid of your debt can help to free up more money so you can follow through on an aggressive savings budget. Focusing on debt payoff also requires you to control spending habits, since the goal is to not create any new debts in the process.

If you have high-interest credit card debt, consider balance-transfer offers that charge zero percent for a period of time, giving you breathing room to pay down your balance. Or you might take out a lower interest rate personal loan to consolidate and pay off your debt.

Recommended: 15 Creative Ways to Save Money

3. Tracking All of Your Spending

An aggressive savings plan won’t really work if you don’t know exactly where your money is going. Keeping track of your spending is essential for making your plan work.

There are different ways to track spending, including:

•   Writing purchases down by hand

•   Using a spreadsheet

•   Linking bank accounts to an expense tracking or budgeting app.

The method you choose isn’t as important as tracking all of your expenses regularly, including cash spending. Getting into the habit of tracking expenses can make the next step in your aggressive savings plan easier to tackle. You’ll be much more aware of where your money goes and how you might economize.

4. Utilizing a Budgeting Method

A budget is a plan for spending money each month. Making a budget each month is central to how to save aggressively, since you can decide how to allocate the money you’re earning.

In its most basic form, making a budget means adding up expenses and subtracting them from income. When you’re trying to save aggressively, the goal is to make the gap between income and expenses as wide as possible.

There’s no single way to make a budget. For example, you might try zero-based budgeting, the 50/30/20 budget method, or cash envelope budgeting. Experimenting with different types of budgets can help you to decide which method works best for you.

Also consider different tools to help you along. Your financial institution may offer budgeting tools, you can download apps, you might use a journal, or even manage your budget in an Excel spreadsheet.

5. Cutting Down Expenses

How to stop spending money is a common challenge; succeeding at it can help you save aggressively. The key is knowing how to prioritize needs over wants and looking for areas in your spending that you can reduce or eliminate.

For example, you can start by making the obvious cuts and jettison streaming services you don’t use or canceling your gym membership. But you can go a step further and look for more drastic ways to reduce expenses, such as:

•   Renting out a room or taking on a roommate

•   Getting rid of your car and using public transportation

•   Embarking on a no-spend year

•   Moving to a cheaper area.

Whether these types of saving tactics will work for you or not can depend on your situation. But allowing yourself to be creative when finding ways to cut expenses can help to bolster your aggressive savings plan.

6. Opening a High-Yield Savings Account

If you’re saving aggressively, it’s important to keep your money in a secure place where it can earn a great interest rate. The higher the rate and annual percentage yield (APY), the more your money can grow.

That’s where high-yield savings accounts come in. High-yield savings accounts can pay an interest rate and APY that’s well above the national average. For example, the typical savings account at a traditional bank pays 0.46%, as of the summer of 2024. But you might find a high-yield account at an online bank that’s paying over 4.00% or more instead.

When looking for a high-yield savings account, consider the APY you can earn. But also pay attention to things like fees, online and mobile banking access, and monthly withdrawal limits. These are important factors when sizing up the best option.

Recommended: Understanding High Yield Savings Accounts

7. Starting a Side Hustle

Starting a side hustle can help you to generate additional income that you can add into your aggressive savings budget. According to a recent report, 36% of Americans have at least one side hustle.

There are different types of side hustles you can try, including ones you can do online and ones you can do offline. For example, you might try your hand at freelancing if you want to make money from home or get paid to deliver groceries in your spare time. You could drive an Uber or sell crafts you make on Etsy.

The great thing about side hustles is that you can try different ways to make money to see what works best. Just remember that any earnings from side hustles or temporary work over $400 are taxable.

Recommended: 11 Benefits of Having a Side Hustle

8. Avoiding Eating Out at Restaurants

Grabbing dinner out can be convenient, but it can also derail your plans to save aggressively. If you’re spending $50 a week on takeout food or meals with friends, for instance, that’s $2,600 a year that you’re not saving.

Learning to plan meals and make food at home can cut that expense out of your budget. If you want to share meals with friends, consider inviting them to a potluck dinner at your house instead. That can be a great way to try new foods without having to blow your budget.

9. Saving Money Windfalls

Windfalls are any money that comes your way that you might not have been expecting. So that can include:

•   Tax refunds

•   Rebates

•   Bonuses

•   Cash-back rewards

•   Financial gifts (i.e., birthday money or wedding money)

•   Inheritances.

Some money windfalls may be small and add up to just a few bucks, while others might be hundreds or even thousands of dollars. It may be tempting to spend those amounts (because it feels like free money), but you can make better use of them by adding them to savings instead.

10. Investing Your Money

Investing your money is the best way to grow it through the power of compounding interest. Compounding means your interest earns interest. When you invest money in stocks, exchange-traded funds (ETFs), and other vehicles, you have a chance to earn interest at much higher rates than what you could get with a savings account, which means the compounding factor is enhanced too. (However, do remember there is risk involved; these investments aren’t FDIC-insured.)

The longer you have to invest, the more your money can grow. So if you’re not investing yet, it’s important to get started sooner rather than later. Some of the best ways to start investing include adding money to your 401k, contributing to an Individual Retirement Account (IRA), and opening a taxable brokerage account.

11. Automating Your Finances

Deciding to automate your personal finances can make saving aggressively less time-consuming, since it’s something you don’t have to actively think about. As mentioned above, you can set up automatic transfers from checking to savings each payday. What’s more, you can also automate deposits to your investment accounts and your bill payments.

Automating ensures that bills get paid on time and that the money you’ve earmarked for savings in your budget gets where it needs to go. You can set up automatic deposits and payments through your bank account; it typically takes just a few minutes.

12. Utilizing the 30-Day Rule

The 30-day rule is fairly straightforward: If you’re tempted to spend money on an unplanned purchase, impose a 30-day waiting period. Thirty days is enough time to decide if you really need to buy whatever it is you’re considering and, if you do, to find the money in your budget to pay for it without having to rely on a credit card.

Using the 30-day rule can help you to curb impulse spending, which can be a hurdle to making an aggressive savings plan work. If you decide the item is still something you want to buy, then you can make the purchase guilt-free. But you might find that what seemed like a smart buy at the time is no longer something you need.

13. Living Below Your Means

Living below your means simply means spending less than you earn each month. When you spend less than your income, you have money left over that you can add to your savings goals.

All of these aggressive savings tips outlined here can help you to get into a mindset of living below your means. When you’re focused on cutting down expenses and sticking to a budget, living on less money than you make doesn’t seem like a struggle.

The Takeaway

Saving aggressively can take some getting used to if you’ve never tried it before, but the end result can be well worth the effort. As you find your savings groove, it’s important to have the right banking tools so you can make the most of your money.

Opening the right bank account can make it easier to follow an aggressive savings plan.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

Are there downsides to aggressive savings plans?

Saving money aggressively can mean having to make certain sacrifices in the short-term. For example, you may have to say no to dinner out with friends, vacations, or new clothes. But those temporary sacrifices can pay off if you’re able to reach your savings goal relatively quickly.

How can I save aggressively if I do not make a lot of money?

Starting a side hustle can help you to create more income so that it’s easier to save aggressively. But if that’s not an option, you can still save at an above-average rate by cutting down your expenses as much as possible and using windfalls to grow your savings whenever they come your way.

Can you aggressively save long-term?

Whether you’re able to save aggressively for the long-term can depend on how committed you are to your plan. If you have a clear reason for saving, then you may not need any added motivation to keep going. On the other hand, you may need to take a temporary break from saving as aggressively if you find yourself chafing under a strict spending regime.

Photo credit: iStock/Farknot_Architect

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

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