Should I Pay Off A Six-Year-Old Debt Or Just Ignore It?
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Should I Pay Off A Six-Year-Old Debt Or Just Ignore It?
We’ve all been there – you get a call from a debt collector about an old bill you haven’t paid in years. Your first reaction might be to just ignore it and hope it goes away. But is that really the best approach? Here’s some advice on how to handle old debt that might help you decide if you should pay it or not.
The Legal Side: Statutes of Limitations
Every state has a “statute of limitations” on debt collection – a time limit for how long a creditor or collector can sue you to recover money you owe. This time period ranges from 3-6 years usually. According to the CFPB, once the statute of limitations expires, a collector legally can’t sue you for the debt.
That doesn’t mean you don’t technically still owe the money though. The debt doesn’t just vanish or become invalid. Collectors might still try contacting you asking you to pay voluntarily. They just lose the ability to take legal action if you refuse.
It’s a good idea to look up the statute of limitations for debt collection in your state. That can help you understand if the collector calling about a 6-year-old bill still has any power to force you to pay through the courts. Knowing your rights is half the battle!
Weighing the Pros and Cons of Paying
Just because you legally might not have to pay an old debt doesn’t mean there aren’t good reasons why you still might want to. Here are some pros and cons to consider:
Pros of Paying It Off
- It’s the ethical thing to do – you did at one point owe this money after all
- Could help improve your credit – unpaid debts hurt your credit score
- Gets debt collectors to stop contacting you
- Prevents possibility of getting sued if debt is still within statute of limitations
- May be able to settle for less than full amount
Cons of Paying It Off
- Might not be worth it if you can’t afford to pay it
- Even if paid, could still remain on credit report for 7 years
- Paying even a small amount could “reset” statute of limitations
- Debt may have been sold to collector illegally or information may be inaccurate
As you can see, there are reasonable arguments on both sides. You’ll have to decide what factors matter most to you in your specific situation.
How Paying or Ignoring Could Affect Your Credit
One key consideration for many people is how paying or not paying the old debt will affect their credit score and ability to get loans. Here’s some information on that:
- Unpaid debts can stay on your credit report negatively impacting your score for up to 7 years.
- Paying off the debt won’t necessarily remove it from your credit history, but could improve your score over time.
- If you are currently trying to get approved for a mortgage or other loan, paying off old debts can improve your odds of approval.
- If the debt is past the statute of limitations, not paying likely won’t hurt your credit any further.
The impact on your credit is not an easy calculation. It depends on factors like how long ago the debt went unpaid, your current credit score, whether you plan to apply for any new credit soon, and more. Consulting a credit counselor could help you understand the potential impact in your unique situation.
Strategies If You Decide to Pay
If after weighing all the considerations you decide paying off the old debt is the right choice, here are some tips on the best way to go about it:
Try to Negotiate a Settlement
Collectors often are willing to accept less than the full amount owed to get an old debt off their books. This is called a settlement. The first step is contacting the collector and seeing if they’ll agree to let you pay a lower amount (say 50% of the debt) and consider the debt settled.
Get any offer to settle in writing from the collector before paying. And don’t provide payment information until you have a document from them agreeing to settle.
Consider Debt Consolidation
If you have multiple old debts you want to take care of, a debt consolidation loan could help. This type of personal loan lets you roll multiple debts into one new loan, allowing you to pay everything off at once. You get a fixed monthly payment on the consolidation loan which is usually lower than trying to pay each debt separately.
Use Savings to Pay in Full
If possible, the best option is trying to pay off the full amount in a lump sum. This guarantees the debt goes away for good. If you have money in savings you can use to pay it off, that will give you the cleanest break.
Just be sure to get confirmation in writing that the payment satisfies the debt before sending the money.
What to Do if You Decide Not to Pay
On the other hand, if you weigh everything and decide not to pay, here are some things to keep in mind:
- Collectors may keep contacting you – be firm in requesting they stop
- The debt likely won’t fully disappear until the 7-year credit reporting period ends
- Don’t make even a small payment – that could reset the statute of limitations
- Save evidence the debt is past the statute in case you get sued anyway
The Fair Debt Collection Practices Act protects you from harassment by collectors. But staying firm and insisting all contact stop can be challenging. Some people choose to simply ignore calls/letters, while others reply in writing with requests to cease communication.
Getting Help
Dealing with debt you haven’t paid in years can be stressful. Don’t feel like you have to face it alone. Here are some resources that can provide guidance and assistance:
- National Foundation for Credit Counseling – Non-profit credit counselors
- Consumer Financial Protection Bureau – Guides on dealing with debt collectors
- Credit counseling services – Many non-profit organizations provide low cost credit counseling and debt management assistance
- Bankruptcy attorneys – Can advise if bankruptcy could be a solution for your situation
The most important thing is being informed. Do your research, understand your rights, and don’t let collectors pressure or intimidate you. Carefully weighing whether to pay, negotiate, or let an old debt go is a personal decision. But knowledge gives you power to make the choice that’s right for your situation.