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Are You Haunted by Phantom Debts?

Andrew Tavin
Andrew Tavin covers budgeting and credit scores for OppLoans. His experience as a comedian lends an approachable and humorous angle to his content and makes the scary parts of personal finance less intimidating for readers.
Updated on March 18, 2021
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Some phantom debts are just old, uncollected debts that you forgot about. But other phantom debts are just straight-up lies told by scammers!

You’re sleeping soundly in your bed when you hear a scratching noise. You figure it must just be the wind, so you try to go back to bed. You shut your eyes and attempt to let your mind wander, but the scratching at the door just gets louder and louder.

You get out of bed and make your way to the door, a rising sense of dread slowly overtaking the grogginess. You look through the peephole and see a man in a suit. They don’t look to be dangerous, but you leave the latch engaged as you crack open the door, just in case.

“What are you doing here?” you ask.

“Someone in this house an unpaid debt. A car loan,” he explains, as he hands you a scary looking “past due” paper.

“Ah, OK,” you respond as you take the paper and close the door.

When you return to your bed, your best friend who sleeps across the room has woken up.

“Who was it?” they ask.

“Oh, just someone informing us about some car loan we have to pay,” you reply.

Your friend gives you a look that chills you to your very bones: “But … that loan has been paid off for ten years!”

Seems like you’re haunted by a phantom debt!

Forgotten debts.

The term “phantom debt” can apply to a few different kinds of debt. We’ll start with the more legitimate kind. These are forgotten debts that you may have thought were paid off. Or perhaps you just hadn’t heard about the debt for a while, and assumed it was dead. But dead debts can come back.

“Phantom debt, or zombie debt, is a phenomenon perpetuated by debt collectors who buy debt in bulk and consumers who don’t monitor their credit reports,” warned Joy Alford-Brand of NewCashView.

“A phantom debt is a debt that someone owed at some point and was never resolved by the original creditor. They are usually sold along with other bad debts to debt collectors who then try to collect on them. They can be resold multiple times, acquiring late charges and penalties along the way.”

These sorts of debts tend to be a bit older.

“Phantom debts are debts that are typically three years old or more, that have since been forgotten about or never existed in the first place,” explained Josh Hastings, founder of Money Life Wax.

Wait a second! Debts that never existed in the first place?!

Fake debts.

Yes, it may not be a home visit in the middle of the night from a man in a suit, but you might get a fake debt collection call from a personal loan or other debt that never existed in the first place.

“Essentially, it’s an attempt by a scammer to collect money that you don’t owe,” Tony Arevalo from clarified. “In car insurance that could be in the form of an ‘accident from several years ago’ that is still awaiting payment. Most people can be caught off guard by a sudden phone call requesting money, and might even for a split second think that they do owe money to someone.

“Outside of car insurance, phantom debt scammers can find creative ways to get you to cough up your hard earned money. The most common scam is related to payday loan collections.”

Debt exorcism.

So how can you deal with phantom debts? If they’re old but legitimate, you’ll probably have to deal with them the same way you’d deal with any other debt. Paying it, looking for forgiveness, or, if things are really not manageable, looking into bankruptcy.

The first step is finding out if you actually have any debts you might be unaware of. This is a good idea regardless of whether you’ve been contacted by someone claiming to be a collection agent.

“The quickest way to figure out whether you have phantom debts is to use a free credit report tool such as Experian’s,” advised Hastings. “Your credit report will list every debt you owe since it details your credit history! As a rule of thumb, consider checking your credit history once per year to avoid phantom debts!”

Knowing which debts you do and don’t owe will also be key to dealing with debt collection scams.

“The number one way to know if you have a scammer on the phone is their general demeanor and attitude,” suggested Arevalo. “We all know that ‘legit’ collections agencies can use forceful tactics and dirty tricks to get you to pay them back. But a scammer will usually have a piece of personal information to try to convince you that they are familiar with your situation. Never give your bank, credit card, or other personal details unless you identify the caller.”

And don’t forget: you have rights!

“The Fair Debt Collection Practices Act gives you the right to request written communication only, so you can request this,” advised Arevalo. “The worst-case scenario is identity theft, and if this happens you can contact the Federal Trade Commission for help on how to recover your identity.”

As long as you’re careful and always do your due diligence, you should be OK. You don’t have to fear phantom debts!

Article contributors
Joy Alford-Brand

Joy Alford-Brand (@joyalfordbrand) became a licensed attorney in North Carolina in 1999.  She has practiced bankruptcy law for 17 years. In 2015, she published a book on personal finance based on her experience as a bankruptcy attorney called Money Basics, Keeping It and Growing It.  She also founded to teach people basic personal finance techniques to help them avoid filing for bankruptcy and learn to be financially empowered.

Tony Arevalo

Tony Arevalo is the Co-Founder of, a thorough car insurance review site. During his years in the property and car insurance industry he has worked with hundreds of clients and has developed in-depth knowledge of what they want and what’s best for them.

Josh Hastings

Josh Hastings is a former High School Athletic Director at the secondary level who shifted his focus in 2016 to focus more effort on his entrepreneur endeavors. In 2017 he founded (@moneylifewax), a personal finance site dedicated to helping millennials with student loans. With an emphasis on money and finance behavior, Josh started Money Life Wax to help millennials realize there are other ways to make money and be happy in the 21st century.

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