What it is:
Zombie debt is debt that won't die.
How it works (Example):
Let's say John Doe ran up a $10,000 credit card bill in his 20s. He works out an agreement with the credit card company, pays $2,000, and is told that the rest of the bill is discharged.
However, six years later, the credit card company sells the remaining $8,000 of debt to a collection agency, which begins calling John about payment. The debt has become zombie debt.