Is it a good idea to pay past debts?

I found your website and hope that you might be able to answer this question. I am advising a friend regarding old debts that are 3-5 years old. He came to me after he was sued by a the law firm representing the credit card issuer for the outstanding balance. He paid the entire balance and accrued interest, but during our discussions, he said that he has other bills that are outstanding and as he has become financially more stable would like to make payments to take care of these balances. He has asked me what the impact of such payments and paying these balances off (a couple he already took care of through reduced settlements), but still has about three more accounts to go. So here are my questions:

1. Is it ever a good idea to settle an account for less than what is owed?

2. How long will a debt settlement impact his credit assuming that the original debt is about 3-5 years old, but the settlements occured recently with debt collectors?

3. Should he continue to pay the previous debt?

4. What impact will paying the previous debt have on his credit score, in general?

5. Should he be working with the debt collectors or the original debt issuer?

6. Can he require the debt collector to report the timely repayments under any new arrangement to be reported to the credit bureau?

Any other advice that you can give on the subject is greatly appreciated!

To add additional context to the situation, the debts were incurred while living in South Carolina, but he has since re-located back to Michigan.

Comments for Is it a good idea to pay past debts?

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Jul 30, 2010
settling debt
by: Mary & Gerri

You raise some very good questions, and we have addressed all of these in our ebook and on our website in more detail. Here is a the short version:

1. Is it ever a good idea to settle an account for less than what is owed? Yes. You may want to listen to our debt settlement podcast for more information on this option.

2. How long will a debt settlement impact his credit assuming that the original debt is about 3-5 years old, but the settlements occurred recently with debt collectors?

Settlements are highly negative. It should be more of a financial decision than a credit score decision. If he can't pay, negotiation can help him put those debts behind him.

3. Should he continue to pay the previous debt?

That's a question he'll have to answer for himself. He needs to find out whether the debt is too old, whether the amounts are correct, and whether he can afford to pay the debts.

4. What impact will paying the previous debt have on his credit score, in general?

Paying those old debts will not likely have a significant impact on his credit. Again, this is probably a financial decision at this point .

5. Should he be working with the debt collectors or the original debt issuer?

These debts sound pretty old. He is not likely able to work with the original creditors at this point though he can certainly try.

6. Can he require the debt collector to report the timely repayments under any new arrangement to be reported to the credit bureau?

Paying a collection account does not help your credit scores. We talk in more detail about collection accounts and credit reports in our ebook.

We don't mean to sound vague, but it sounds like there are a lot of questions here, and perhaps the best advice is to have him read the ebook so he can fully understand his options. He's very lucky to have you helping him!

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