Should you pay off ALL your Debts?
There are some people who believe that paying off all of their old debts is the ultimate financial achievement. Imagine getting rid of all your responsibilities to pay your creditors every month. That has to feel pretty darn good, right? But what does it mean to pay off all your debts in full?
Some people approach debt from the moral side of things. These folks believe that for a debt to truly be paid in full, it must be paid back to the organization that your originally borrowed from. This, however, is not always possible. If a debt goes to collections or if a lending institution sells your account, there is really no way to meet this lofty moral obligation.
The other side of paying off your debts is paying them off completely; meaning that you don’t owe a penny to any creditor or a particular creditor as the case may be. Again, this is not always possible, either. Some people wind up negotiating with their creditors to come up with a lower total amount to pay off. Other people go through bankruptcies and are not required to legally pay back the full amount of their pre-bankruptcy debts.
Some Things to Reflect On
Now that we have covered some minutia related to paying off your debts, we have to talk about the bad things that do happen when people fail to take paying off their loans and credit cards seriously. If you default on a loan, that will stay on your credit report for seven years. Some people think that if they wait it out for seven years, that they are in the clear. This is not true, though, as some creditors still have recourse to recover the money that you owe them. For example, if no legal judgment was every made against your, the courts may still side with the creditor with regards to the money you owe. This is not usually the case, as most creditors will write off the debt after that much time has transpired.
What if you were able to pay off your old debts right now? The first thing you would wan to do is to pull your credit report from all three of the major credit bureaus. After that, you should go through your credit report, to see which of your old debts are still active. Those are the debts you would pay off first. If you find any debts that are recorded as forgiven or uncollectible, you may have to reach out to the creditor to come up with a negotiate solution. This may prove to be more difficult than you might think, so it may take some time to iron things out. You may wind up contacting a lender that already forgave your debt, and then find that they want you to reactivate your account. This may make your responsible for the already-forgiven debt.
If you find debts on your credit report that are older than seven years, it may be best to just leave those debts as they are. It depends on the laws in your state. There are some states that have a statute of limitations on older debts, that essentially absolve you of responsibility for repayment.
Do yourself a favor and pay off as much of your debt as you can – both recently acquired debt and those that have been on your record for a long time. Keep the tips that we just shared with you in mind, and consult a financial professional for guidance on more complicated debt repayment scenarios…
Latest posts by Ian Dallas (see all)
- Presidential Appointment Powers Must be Limited Soon - August 29, 2016
- Should you be in a Hurry to pay off Student Loan Debts? - June 6, 2016
- Obama Administration Appears Set to Wage War on Online Lenders - April 25, 2016