How to Avoid the Zombie Debt, Ghost Mortgage & Rebuttable Presumption Phenomenon!

I hate it when people can’t let go of the past. Debt collectors are the worst.” – Author unknown

The story starts out familiar enough: once upon a time, you had some personal debt, and then you paid it off. But here’s the plot twist: zombie debt, ghost mortgages, and rebuttable presumption! So what the heck are we talking about? Basically, these are paid-off debts that are coming back to haunt you from the grave. Even though they’ve long since been resolved, tricky debt collectors will unlawfully try to scare you into paying a debt you no longer owe, or paying a debt that belongs to someone else entirely! Don’t think it can happen to you? Let’s take a look at How to Avoid the Zombie Debt, Ghost Mortgage & Rebuttable Presumption Phenomenon!

What is Zombie Debt? states the following, “Zombie debt is either debt you’ve already paid off, debt that’s too old to be collected, or debt that belongs to someone else entirely—and it’s come back to haunt you.” In other words, debt collectors are trying to get the money they have no legal right to go after.

Zombie debt can rise from the debt graveyard in a few different classifications:

  • computer errors
  • debts that don’t even belong to you – which means you’ve been a victim of identity theft
  • unpaid debts that have fallen off your credit report after seven years – but debt collectors can still try to haunt you into paying
  • settled debts – these are debts that former lenders and yourself have resolved, possibly through bankruptcy proceedings or other avenues
  • time-barred debts – this scenario occurs when you have unpaid debt but the legal time limit, or statute of limitations (ranging from three-to-six years depending on your state), has run out for a creditor to pursue you, but beware! If you make a payment, the clock effectively resets and your debt is free game for collectors to come after you. advises, even though “There is no legal obligation to pay back zombie debt, but debt collectors can be aggressive and unscrupulous in their attempts to get people to pay.” advises, “There is no benefit in paying a debt that is beyond the statute of limitations because paying anything will restart the statute of limitations, put the debt back on your credit report, and enable the debt collector to take you to court.

According to situated in Houston, “Creditors in Texas have 4 years to take legal action against a consumer. After 4 years, the debt is dead. Creditors trick consumers into reviving old debts. These are called zombie debts.” It’s so prevalent that, “Texas Governor Greg Abbott signed a bill into law on September 1, 2020, to protect consumers from creditors seeking to collect on zombie debts.”

What is a Ghost Mortgage?​ defines a ghost or phantom mortgage as a “Mortgage that homeowners thought was dead and buried that springs back to life, sometimes haunting them all the way to foreclosure.” They cite the story of a hard-working homeowner couple in Topeka, KS, who seemingly did the right thing by refinancing their existing mortgage to take advantage of lower interest rates. But even though the creditor stated their old loan was paid off, records proved to show otherwise which lead them down the path to financial ruin, including trashed credit scores and eventually foreclosure.

It was discovered that the couple’s bank used a private mortgage recording service that had mistakenly filed an ‘Erroneous Release of Mortgage’ document with the local county recorder’s office, which identified their mortgage had “not been fully paid, nor satisfied, nor discharges, but instead, continues to exist.” They hired a lawyer but in the end, their resulting financial situation was too taxing and the creditor foreclosed on their home.

Again, don’t think it can happen to you? Depending on the sometimes fast-moving housing market, many lenders try to push through as many mortgages as possible, as quickly as possible. And this is where some legal procedures can get side-stepped, especially when fake ‘robosigners’ were once prevalent by posing as legal representatives so they could forge documents and titles, and use stolen notary stamps. Many homeowner victims ended up with paid-off mortgages coming back from the dead, while others were harassed by debt collectors even though they never even had a mortgage to start with.

The Latest Ghost Mortgage Scam reports there’s a new ghost mortgage scam you need to be aware of, “Law firms are pursuing property owners, threatening them with the loss of their property for unpaid second mortgages (zombie mortgages). Some people thought their mortgages were discharged in bankruptcy, while others wanted to pay on their mortgages but couldn’t because there was no longer anywhere to send their payments when their lenders disappeared during the mortgage crisis a few years back.”

Real estate attorney Ron Jones states, “Zombie second mortgages step out of the past, haunting property owners, and threaten their ability to remain in their home or commercial building.” Jones states this commonly happens years after a bankruptcy has been settled where the owners think their second mortgage was discharged during the proceedings, but in fact, the lender still has a contractual lien against the property, meaning they still owe the money and should have been paying on it all along.

Another ghost mortgage scam scenario occurs when a lender has disappeared and the homeowner no longer knows where to send the payments. Jones says, “As strange as it sounds, the fact that you were unable to keep payments on the second mortgage does not mean that the money isn’t owed. It is owed.”

Ghost Mortgage Debt Buyers

As a ghost mortgage is still a form of zombie debt, uncollectible accounts that have been written off can be purchased by a debt buyer for cents on the dollar. The goal of the debt buyer is then to recoup whatever money they can, however they can, and by possibly using unscrupulous tactics as debt collectors. Jones explains that this process is a hugely profitable industry for debt buyers as, “Assets of a defunct lender are purchased for pennies on the dollar by one of these debt buyers. So, if $100,000 is owed, the debt buyer might pay 4% to 10% of that amount and gets the opportunity to collect $100K. Many describe this as legalized extortion. I concur.”

Ghost Mortgage Legal Advice If Your Lender Goes AWOL

If you find yourself in a sketchy ghost mortgage position where the lender has seemingly disappeared, Jones recommends doing the following:

  • Contacting a title or escrow company’s customer service department as they may have information on failed mortgage companies and who’s taking over their payment process
  • Contacting Fannie Mae and Freddie Mac as they may also have resources on mortgage company successors
  • Putting aside the mortgage payments into a special bank account so when you do locate where your payments should be going, you’ll already have the amount saved on hand
  • Covering yourself legally, by contacting a real estate attorney; “Don’t attempt to handle the process on your own,” warns Jones.

What is Rebuttable Presumption?​

According to Cornell Law School, a rebuttable presumption is defined as, “A particular rule of law that may be inferred from the existence of a given set of facts and that is conclusive absent contrary evidence.” So in other words, a court assumes that the information presented to them is taken to be true unless proven otherwise.

Rebuttable Presumption and Zombie Debt

Even though zombie debts are considered dead, “A lack of supporting documentation creates a rebuttable presumption that the debt collector did not make a reasonable good faith determination before attempting to collect on the debt,” states in their report entitled Past Due: Why Debt Collection Practices and the Debt Buying Industry Need Reform Now.

They go on to recommend, “A person attempting to collect on a debt should be required to prove that a debt obligation is legally enforceable before taking any further action. State law, federal law or rules, and court rules should create a rebuttable presumption that the debt collector has not made a good faith determination of a debt’s legal status unless the debt collector produces adequate documentation supporting that determination.” states, “A legal presumption can be refuted (rebutted) if one of the parties is able to present evidence that effectively disproves it. This is known as a rebuttable presumption. By and large, rebutting a presumption requires the objecting party to adequately demonstrate that the presumption is untrue. The party may do this by presenting testimony, documents, or records that support his or her position. Generally, the presumption will be deemed rebutted if a reasonable person of average intelligence could rationally decide that it doesn’t apply to the case at hand. Rebuttable presumptions extend to nearly all areas of law.”

How a Creditor Tries To Trick You into Reviving Zombie Debt

You’re probably thinking, that’s so crazy, and there’s absolutely no way you’d pay on a debt that isn’t yours or pay for past debt again, right? Here’s an even crazier thought: if you’ve had past debt, having it removed from your credit report does not mean that it’s forgiven, or that sometime in the future a creditor will not attempt to get their money back. A creditor can simply write off the debt or sell their debt to a collection agency which may soon seem like you’re living in a nightmare.

The stress and anxiety zombie debt and ghost mortgages may cause can take a tremendous toll on you, which can easily boil over into your home life and work situation. Zombie debt collectors, aka debt scavengers, are notorious for using bullying tactics to trick consumers into paying debt they technically don’t owe. Remember that a debt collector has only one job to do – to hunt down people with debt and get the money owed from them – and many times their tactics are scrupulous and not always legal.

Zombie Debt Collector Tricks of the Trade Include:

  • Outright lying to you.
    • they’ll identify themselves as someone else entirely (not a debt collector)
    • they’ll say you owe much more money than you do
    • they’ll tell you you’ll go to jail if you don’t pay, some may even stress that police are standing by or are on the way to your home
  • Harassing or threatening you.
    • debt collectors will state that they will sue you
    • they may contact your friends and family
    • they may even threaten you with violence if you do not pay your supposed debt
  • Trying to squeeze information out of you.
    • debt collectors will try to confirm any little piece of information that they can by asking for your current address, phone number, employer, Social Security number, or heaven forbid, your mother’s maiden name, which is commonly used to steal your identity by using government identification

Best Advice When Dealing With A Debt Collector

The  best advice? If a debt collector is after you, that means they already have all of your information, so do not give a debt collector any further information no matter how pushy or arrogant they seem, as you’re then acknowledging the debt is yours in their eyes, meaning their sketchy collection tactics could then escalate to another level entirely. By providing additional information to a debt collector, you’ve taken their bait and opened up yourself to a repayment scenario whereby many collectors won’t stop bothering you until you pay something, anything. goes on to say, “The important thing is not to spend any time on the phone with the debt collector. Ask for their address and send them a certified letter within 35 days of contact. Dispute that you owe the debt and ask them to prove that you owe it. If you continue to be contacted by the debt collection agency, write them another letter and inform them that they cannot contact you unless it is by writing or if they are going to sue you. If the debt is beyond the statute of limitations the collector will probably go away.”

Questions You Need To Ask a Debt Collector When They Contact You

The CFPB provides the following information entitled ‘What should I do when a debt collector contacts me?’. They advise you to ask the following questions:

  • Find out the identity of the debt collector, including their name, address, and phone number
  • Ask for the amount of the debt owing, including any collection costs or fees associated with the debt
  • Ask what the debt is for and when it was incurred
  • Ask for the name of the original creditor
  • Ask for information to identify whether you or someone else owes the debt

Legally, the first contact from a debt collector must be in writing. If they attempt to contact you otherwise first, insist that they provide you with a legally-required written notice and don’t provide any personal information to them.

What Debt Collectors Legally Can and Cannot Do

According to the Fair Debt Collections Practices Act, these are the rules third-party debt collectors must follow.

Debt collectors can:

  • contact only you between 8 a.m. and 9 p.m.
  • contact you by phone, email, text message, and even social media platforms, such as Instagram, Twitter, and Facebook (as per the CFPB). Who knew?
  • negotiate the amount of debt that you owe, which can be as little as 25% of what you originally owed, but this agreement needs to be in writing before it’s considered to be paid in full
  • pressure you with daily phone calls, social media messages, and letters, or inform you of their plans to pursue a lawsuit
  • sell your debt to another collector
  • sue you to settle the debt

Debt collectors cannot:

  • come to your workplace
  • communicate with you using a postcard
  • deposit a post-dated check before the date provided
  • falsely claim they’re attorneys when they’re not
  • falsely claim to have you arrested
  • harass you, nor use deceptions, unfair, or abusive collection tactics
  • misrepresent the debt, including the actual amount owed
  • threaten to do things that can’t legally be done, or they have no intention of carrying out
  • try to collect additional fees on top of the debt owing, unless allowed by law
  • use a logo or symbol on an envelope that identifies them as a debt collection agency (as it’s a private matter between you and them only)

A Different Approach To Debt Collection

To be fair, a recent article by has NY Collectors Association president and Capital Collection Management founder Jacob Corlyon stating that while debt collectors take a bad rap, “We’re not all the boogeyman.” He’s determined to change the perception of debt collectors to be helpful and willing to work with consumers. Corlyon says that while they’re trying to collect, they’re not desperate for your money, “We didn’t extend the credit. We’re not out of the money. The creditor is the one that’s waiting for that money to come in. We are brought in as the consumer advocate to work with the consumer and find a solution.” Corlyon also emphasizes that his company treats consumers with respect and dignity, stating: “We’re customer-centric. We’re solutions-oriented. Our belief is that everybody should be treated with empathy and provided the concierge experience so that we can get them back on track and get them back to our client in good standing.”

Options For Paying Off Your Debt

If you have past debt that’s been written off after seven years, it can still cause problems and lessen available avenues for you when it comes to getting credit cards, loans, or even when you’re looking to rent a home. Besides going down the bankruptcy route, you’ll have to go after your debt methodically to get it under control and paid off. A few options to consider as per when you’re trying to pay off debt include:

  • apps like Mint and You Need A Budget to get your spending under control and realize how debt can impact your net worth
  • using debt repayment plans like:
    • the avalanche method, whereby you maximize paying off the balance of your highest APR debt first and then move on to other debt
    • the snowball method, whereby you prioritize paying off your debt starting with the smallest balance to the largest, ignoring the APR

How To Prove You Have Paid Off A Debt

Having a paper trail is key to proving you’ve already paid/fulfilled your debt obligations. You should have the following paperwork in your possession:

  • A credit report will show any debts you’ve owed and when you paid them off; if there’s a discrepancy, contact the credit bureau to correct your report
  • A letter from your lender stating the loan has been paid off in full
  • A certificate of satisfaction of the mortgage
  • Any documentation showing a lien or trust deed on your property has been discharged

And it’s so easy to securely store all your vital household paperwork online with DomiDocs! That way you’ll have access to all your documents 24/7/365, right at your fingertips. Simply upload your critical mortgage and title papers, along with receipts, photos, and videos of your home, to our free DomiDocs’ homeowner management platform.

Ways To Help Protect Yourself From Zombie Debt

There are some simple steps you can take to help ensure zombie debit isn’t coming for you anytime soon. 

  • Order your free annual credit report from the three major credit bureaus, Equifax, Experian, and TransUnion, to check for inaccuracies on your credit report. states you can obtain your free credit report by:
    • visiting com
    • calling 1-877-322-8228. (For TTY service, call 711 and ask the relay operator for 1-800-821-7232.)
    • by mailing a completed Annual Credit Report Request Form to:

Annual Credit Report Request Service

PO Box 105281

Atlanta, GA 30348-5281

The Consumer Advice division of the Federal Trade Commission warns that is the only authorized website to fulfill orders for your free yearly credit report, so be aware of scammers using similar website names and/or misspelled names on purpose in hopes you’ll land on their page instead of the only official credit report requesting website as authorized by federal law.

  1. Always know what you owe and to whom. Knowledge is the best defense, so if a debt collector comes to knock, you’ll immediately know if they’re trying to scam you or not.
  2. Don’t give out any personal information. As mentioned above, if the debt collector is legit, they’ll already have all of your personal information on hand.
  3. Know what your rights are. Even though there are strict rules for debt collectors to follow, many times they just don’t, so if you feel you’ve been dealing with unfair and unlawful debt-collecting tactics, file a complaint with the CFPB.
  4. Be debt free. Once you’ve paid off all your debts in full, it could be physically and emotionally painful, but experts agree the best way to avoid debt is to cut up and not use any existing credit cards, never ever again as it’s just too tempting. But make sure not to cancel any cards as this will negatively affect your credit score.

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