It generally refers to debt that is more than 3 years old, is long forgotten about or belonged to someone else – like someone with the same name or a deceased parent.
George missed an 11 cent Verizon bill and seven years later it had grown to $4,000.00.
[1] Sometimes it was never owed, was owed by a deceased parent, or that was previously owed by the presumed debtor, but was previously paid in full, settled, discharged via bankruptcy or a dismissed court case, is beyond the statute of limitations, or is otherwise not legally collectible, but that a collection agency or other similar service is aggressively attempting to collect, often fraudulently.
[3] Very often, collectors of phantom debt use intimidating, abusive, or otherwise illegal tactics in an attempt to collect phantom debt that include frequent phone calls, calls to the victim's place of employment, or threats of scary consequences against the victim that sometimes include arrest and/or criminal prosecution.
In the United States, such tactics violate the Fair Debt Collection Practices Act.