Never paying collections?

[exranger06]

I have a question regarding old accounts that are in collections. I know that if you pay off the debt, the negative mark will remain on you credit report for the next 7 years after the final payment. But what happens if the debt is never paid off? Does it just go away after 7 years of no payment?

By the way, this post isn't about me. My credit report is spotless. I'm helping someone else straighten out their finances.

[NumberCruncher]

This is purely anecdotal, so take it with a grain of salt - I knew a guy who used to work in collections and he said it was best to just wait it out/not pay.

That said, I don't think worrying about the credit score is the most important part to this equation. If they can get out of debt without turning to bankruptcy, that 's great. And on some level, a lower credit score may be good - less credit to take advantage of in the future/less likely to get into a lot of debt again.

It all depends on the situation, though, really.

A lot of people have had good things to say about Dave Ramsey for getting out of debt - you might see if he has anything written about this sort of thing.

[willn]

I have a question regarding old accounts that are in collections. I know that if you pay off the debt, the negative mark will remain on you credit report for the next 7 years after the final payment. But what happens if the debt is never paid off? Does it just go away after 7 years of no payment?

By the way, this post isn't about me. My credit report is spotless. I'm helping someone else straighten out their finances.

Doesn't just go away.

It may drop off your credit report.  But bad debts have a way of popping up at bad times.  The owner of the debt could sue the debtor.  The statute of limitations varies widely by state.

Morally what happens, is the debtor owed the bill and didn't pay it. They broke a promise.  When they can pay it, they should.

Usually with credit cards and other consumer debt, once it is written off as bad, a debt collector buys the debt, and it can be settled for pennies on the dollar.  Get the settlement in full agreement in writing and keep it forever, don't give electronic access to bank accounts.

[Eric]

You need to check the statute of limitations for your state.  If it's past that, no matter who calls and demands money or threatens you(r friend), ignore them.

[exranger06]

This is purely anecdotal, so take it with a grain of salt - I knew a guy who used to work in collections and he said it was best to just wait it out/not pay.

That said, I don't think worrying about the credit score is the most important part to this equation. If they can get out of debt without turning to bankruptcy, that 's great. And on some level, a lower credit score may be good - less credit to take advantage of in the future/less likely to get into a lot of debt again.

It all depends on the situation, though, really.

A lot of people have had good things to say about Dave Ramsey for getting out of debt - you might see if he has anything written about this sort of thing.

Bankruptcy is not an issue. I got her spending under control and she is on an allowance. She's not allowed to use credit cards unless she gets my approval first. I monitor all of her accounts almost every day. She has almost all of her consumer debt paid off, and pretty much the only thing left is $124k in student loan debt, which I just helped her consolidate. I figured since we got the debt situation almost completely sorted out, I should get to work on her credit. I just took a look at her credit report and found old 4 accounts in collections, one of which is an old cable bill for about $1k.

[Rebecca Stapler]

The cable bill can prevent her from getting cable in the future if there's only one cable company in town (is that really a problem, though?)

But yes, bad debts disappear from your credit report eventually, and the ability of the creditor to collect on them also disappears -- based on the SOL by state. That doesn't mean that they won't try to collect. Any penny she pays towards that debt reinvigorates the SOL, so even if it would have been "uncollectable" (legally) in a few months, if she pays $0.01 towards it she has to wait the full SOL before it becomes uncollectable.

As for the morality of the situation? It's equivocal, IMO. The company collecting the debt has bought the debt for pennies on the dollar; they know most people don't pay it and are taking a risk in trying to collect it. Like all investments, sometimes those risks bear fruit and sometimes they don't. Same goes for the original creditor -- they took a risk, they lost on that one, but probably gained on another one. It's a corporation, it's doesn't have feelings ;) And if they're not looking for her, I don't think she should go looking for them!

[exranger06]

The cable bill was from when she lived in VT or RI. Verizon communications. Here in CT, Comcast is the only game in town. So, getting cable shouldn't be an issue. Looks like the SOL for CT is 6 years.

[Rebecca Stapler]

The cable bill was from when she lived in VT or RI. Verizon communications. Here in CT, Comcast is the only game in town. So, getting cable shouldn't be an issue. Looks like the SOL for CT is 6 years.

Actually, the relevant SOL can be a complicated legal question, but CT is the last of 4 states I'd pick for the relevant SOL if she incurred it in VT or RI. DE is the other state I would consider (assuming Verizon is incorporated in DE). But you wouldn't be able to figure out the answer without doing some legal and factual research.

[willn]

As for the morality of the situation? It's equivocal, IMO. The company collecting the debt has bought the debt for pennies on the dollar; they know most people don't pay it and are taking a risk in trying to collect it. Like all investments, sometimes those risks bear fruit and sometimes they don't. Same goes for the original creditor -- they took a risk,

I would agree more strongly if it was a mortgage or car loan. The creditor is taking a risk and getting paid for it by interest. In the case of Comcast or another service, I think its a different case.  The provided a service, she should pay for it.  I believe when you agree to buy something you should pay for it, even if you have to settle.  Those of us who do pay have to cover the costs of those who don't.