Debts to Consider Not Paying Off
So you have found yourself in debt and you are not able to pay off all of your debts, what do you do?
Let’s first say that debts should not be ignored and the at least the minimum should be paid on all your debts especially for those that impact your credit score, but the fact is not all of us are able to do that so something has got to give.
You should then look at the consequences of not paying each debt and determine which ones you can bear and the ones you can’t.
You will first like to pay for your essentials like housing and food as these impact your life and then your car if you need it and then the things that you can’t avoid like taxes and alimony before you pay your bills.
It is also an idea to call your debtors and ask them for more favorable repayment terms so that you are able to lower your bill or have monthly payments that are lower.
There are also debts that could be less painful not to pay off if you are having trouble to pay the minimum on all your debts. Lets take a look at these debts that you could consider not paying.
You could consider not paying off one of your unsecured debts like a credit card bill or a hospital bill.
With a secured debt an asset backs it so if you don’t pay these you can lose your asset, but with an unsecured debt you don’t have an assets to lose.
However, this doesn’t mean that you should stop paying your unsecured debts, as this will have an effect on your credit score. If you find yourself in a situation though and not able to pay all your debts then consider not paying unsecured debts before secured debts.
If you need to choose, which unsecured debts then take a look at what you owe and see which of these will hurt the least if you do not pay it off.
When we say underwater mortgage it means that you owe more than what the home is worth.
If you are in this situation and are having problems making payments on this and your other debts then you should consider walking away. If you are not heavily underwater then it could make sense not to pay.
This will damage your credit score, but you shouldn’t be wasting money on a home that may take years and years to be worth what you have paid.
Determine what your home is worth and what homes close by are selling for.
However, it is still better to satisfy a mortgage or have the terms modified by your lender then just walk away. If you are able to pay then you should.
Very Old Debts
Most debts are removed from your credit report after seven years. So if you have a debt that has been delinquent for say 6 and half years then you may not want to pay it off and rather pay for more pressing debts.
The old debt has already affected your credit score and if you start to repay it after years of leaving it then you will start the debt all over again and this can other complications.
A debt should not be ignored, but if you are having problems then you need to make compromises. You can also inform your creditors of your problems and they may be willing to work with you so you can afford your debts.