whether or not i should pay off my debt

[bjl584]

Originally Posted by ektorp

thank you all for your responses. the main response i am hearing has to do with morals and ethics and legal obligations. i get that. i get all that...i really do. the message i am getting is that we live in an ideal world where everything works exactly the way it is suppose to, which is far from true. our country's current economic status is a clear indication of this. as i previously stated, until recently i've always been a very financially responsible person meeting all of my financial obligations. i never had a late payment in over 10 years, with the exception of my recent mortgage.

yes, technically i bought a home i could not realistically afford...but since i technically could not afford it, the lender never should have given me the loan in the first place. millions of other americans are in this position, not just me. the banks should not have given out these loans but now it's too late and its something we all need to deal with. the government is bailing out these banks costing billions of dollars. when times get tough, you adapt. you put set aside your normal conventions and do what you have to do in order to make the best decisions for yourself.

i am interested in settling my debt because it simply makes the most financial sense for me. one thing worth mentioning is that when i bought my property, i put 80k as a down payment. that is now gone. the 25k i have in savings is all i have. if i use that to pay of credit card debt i am left with nothing else. yes, i should meet my financial and legal obligations, especially when i have the means to. i get that. but like i said...when times get tough, you adapt. you assess all of your options and see what makes the most sense. i already lost 80k in my home and have no interest in losing 25k more. settling a debt with a financial institution is very different from settling a debt from another person. debt settlement is a legal option and a great option for many people. my credit is already shot. i have accepted that. paying off my debt will not help it...very little if at all. and again, i have no need for credit in the near future. so settling my debt for a fraction of what i owe seems to make the most sense to me.

the question i have is this...if someone were to offer you 25k in cash and the only cost to you would be that it would significantly reduce your credit score for about 3 years when you have no need for credit...would you take it? that's pretty much the way i see it.

I would pay it. You borrowed it, so pay it back. You may need your credit score more than you realize. Insurance companies are known to run peoples' scores to determine rates, and prospective employers will look at your score to determine your level of responsibility before extending a job offer.

[wincrasher]

All this morality talk is just useless pontification from people not facing hard choices in their own lives.

I'd advise you to just weigh the pros and cons of what it is - a business decision.

If you default, you kill your credit. Time isn't the only thing that will repair your credit. You have to have credit to use to improve your score. So think about the ramifications of that.

Also, it's not just about buying a car or house. Credit is pulled for rental housing or if you are wanting a job in many fields - particularly finance and retail.

Another thing to consider - if you pay out all your cash, and then have no cushion, you could easily wind up in debt again.

If I were you, I'd want to keep as many options open as you can. Keep some cash, pay down debt, and consolidate or transfer to get better rates. Unfortunately, the credit game is one where the rules are stacked against you. There is no easy way out without a severe penalty.

So if you are working and have money coming in, pay some of your highest interest debt, keep some in the bank for emergencies, and keep plugging away at your balances as you have money coming in.

Good luck in what you decide!

[jpg7n16]

Originally Posted by wincrasher

All this morality talk is just useless pontification from people not facing hard choices in their own lives.

Yeah... what does that Jesus guy know anyways?

I'd advise you to just weigh the pros and cons of what it is - a business decision.

And we all know how good the world would be if there were no morals/ethics in business.

[wincrasher]

Yeah, he said that slaves should obey their masters. Quite the progressive thinker.

[disneysteve]

Originally Posted by wincrasher

All this morality talk is just useless pontification from people not facing hard choices in their own lives.

If OP didn't have the money to pay the debt, I'd say don't pay it. But he HAS the money. In my mind, that means he should pay the debt. I don't feel that is "pontification".

[wincrasher]

If you read my post, then you'd notice that I also advised that he pay his debt, but because it is his own best self interest, not some moral guilt trip.

If it's truly a moral argument, then having the money or not would be irrelevant.

[bjl584]

Originally Posted by wincrasher

If you read my post, then you'd notice that I also advised that he pay his debt, but because it is his own best self interest, not some moral guilt trip.

If it's truly a moral argument, then having the money or not would be irrelevant.

I would argue that it goes beyond morals. When you take on debt and sign your name on the dotted line, you have entered a legally binding contract with a lender. He is legally obligated to repay the debt that he voluntarily incured. Whether he is facing hard times or not is what is irrelevant. Pay the debt back, and if not, then the legal consequences will be to have your credit rating left in shambles preventing you from lending in the future. He will have effectively stacked the deck against himself.

[disneysteve]

Originally Posted by wincrasher

If you read my post, then you'd notice that I also advised that he pay his debt, but because it is his own best self interest, not some moral guilt trip.

If it's truly a moral argument, then having the money or not would be irrelevant.

I agree. The moral argument only comes into play when the person has the money and chooses not to pay his debts because it is "better" for him not to, which is what OP was proposing.

If he doesn't have the money, the moral issue is moot since he can't repay money he doesn't have.

[wincrasher]

Then what you are saying is that if you have money, you should be moral. But if you don't have money, it's OK to be immoral?

So then, in turn, the more money you have, the more moral, or righteous you are.

[disneysteve]

Originally Posted by wincrasher

Then what you are saying is that if you have money, you should be moral. But if you don't have money, it's OK to be immoral?

So then, in turn, the more money you have, the more moral, or righteous you are.

Not at all. But you can't pay money that you don't have, morals or not. I don't think it is immoral to default on a debt that you truly have no way to repay. That is very different than intentionally defaulting on a debt that you are able to pay.

You don't have to have money to have morals/ethics. We've certainly seen endless examples of people with lots of money and no morals. You do have to have money to repay a debt, though.

[DrSavin]

Despite what should be done, i'd be interested in what many would do put in the situation from a first person perspective.

Anyhow, it seems the OP has made up his mind.

[jpg7n16]

Originally Posted by wincrasher

Yeah, he said that slaves should obey their masters. Quite the progressive thinker.

Which they should (except for immoral requests). Just like employees should obey their bosses (except when being asked to do something immoral). But you're forgetting that He also spoke for the equality of women, children, and minorities about 2000 years before Western civilization adopted those beliefs. So yeah - pretty "progressive" by that measure.

(Samaritans were minorities and treated with racial prejudice in Israel during His lifetime)

I would love to debate the ethics of Jesus with you, but since this is a personal finance forum, maybe you would rather debate at Christian Forums - Where Christian Community Meets Faith - I'd be more than happy to discuss this with you there.

Originally Posted by disneysteve

Not at all. But you can't pay money that you don't have, morals or not. I don't think it is immoral to default on a debt that you truly have no way to repay. That is very different than intentionally defaulting on a debt that you are able to pay.

You don't have to have money to have morals/ethics. We've certainly seen endless examples of people with lots of money and no morals. You do have to have money to repay a debt, though.

Totally agreed.

Originally Posted by DrSavin

Despite what should be done, i'd be interested in what many would do put in the situation from a first person perspective.

Anyhow, it seems the OP has made up his mind.

I would personally prefer to have $20k in the bank, 0 debt and a trashed credit score.
But I would also understand my obligations both legally and morally to repay the debt I took out.

So I would personally pay down 15-20k immediately, and the rest over time.

[DavidBibby]

Originally Posted by DrSavin

Despite what should be done, i'd be interested in what many would do put in the situation from a first person perspective.

Anyhow, it seems the OP has made up his mind.

If I had $25k in credit card debt, and I also had $25k in the bank and a source of income.. I would, without question, pay the debt.

Then I'd start an emergency fund and prepare for the rest of my debt free financial life.

[LivingAlmostLarge]

Don't forget if you settle with the CC company it's taxable income the amount forgiven. It's not scot free.

[Seeker]

Originally Posted by asmom

Unlike the others, I am not going to tie your unwillingness to pay off your debt to morals. The credit card companies willingly loaned money to people who perhaps could not afford it in an effort to make huge profits and it worked. I won't even get on the subject of unreasonable fees and interest rate hikes. Greed goes both ways. It's quite unbalanced to suggest that the banks' actions were justified as "just doing business" but consumers have some sort of "moral obligation". It's business both ways. And I am someone who never even pays my bills late. I've never not paid a debt in full. But that's the way I do business. Now the way I treat people and individuals is guided by my morals and principles.

However, I do question the way you use your resources. You are saving the $25K for "emergencies". You've already lost your house and you ran up debt paying off medical bills. What do you consider an emergency? If you had that money on hand or the ability to save that much money, you might have considered paying your mortgage until you were able to get an adjustment or paying your bills outright before you accrued the debt. It's water under the bridge now but for food for thought in the future.

P.S. If you have a good, stable income, then pay the debt off in full. You don't have to pay at once. Start with a lump sum of maybe 10K from your savings and pay the rest off over a year from your income. You'll preserve a good bit of your savings that way. If your job situation is shaky, go for the settlement and hold onto your savings. In the future, pay as you go.

Yes, agree with this 100%.

OP always paid his bills, but never in full? He's just always added to his total debt to one day realize that it might be advantageous to take advantage of the system in a different way; like so many others.

After all, in not paying his debts he was doing other things with the dollars. He already was taking advantage of the system of buying on credit and paying later.

But not paying in full. And that's the key.

OP says he was "responsible" -- please tell me how? Not paying in full each and every month is not a sign of a responsible person.

He was using the dollars for other things. Buying another house. Trying to leverage every dollar.

So, OP is quite proficcient on blaming others for his personal choices. Blame the economy on someone else. Blame the banks and other institutions for his choice.

He's always continued to rack up debt, just because he could.

Now it's turned back on him and so many other Americans. So once again, it's take advantage of the situation time. Just because he can. Just because someone suggested it to him.

Realistically, settling debt has a price. LAL mentioned one of the prices in the post above me.

Five years down the road, he will be back in the same situation. People don't learn by rejecting debt; people learn by admiting that they have made a mistake and working to stop making the same wrong choices.

What you buy and how you pay for it is up to one person: you. If you cannot afford it, don't buy it.

Anything else says a lot about each individual person. How you fix a problem is not by avoiding it, or reducing it. Take your lumps, learn and grow.

[littleroc02us]

Personal responsibility doesn't exist in a lot of people just face it. Honestly, you can only do what is right in this world and try to help others see the way, but if choose not to, then that is a sad case.

[LivingAlmostLarge]

Seeker I agree 100%. It's easier to blame everyone else.

[MonkeyMama]

Originally Posted by jpg7n16

A good question to ask yourself would be:

If someone owed you $25k and had $25k in the bank, how would you want them to handle that? Would you rather they paid you in full for the money they borrowed? Or would you rather that they settled with you for 20% of what you owe, so they could keep cash on hand?


Whatever your answer to that question is, you should do the same for the people you owe.

Amen! Do unto others...

I am missing the part where the OP is totally broke and could never possibly pay off this $25k.

???

100% I would pay off the debt in his shoes. Maybe not all at once. But I would pay back every penny owed. No doubt about it!

[MonkeyMama]

Originally Posted by Seeker

Five years down the road, he will be back in the same situation. People don't learn by rejecting debt; people learn by admiting that they have made a mistake and working to stop making the same wrong choices.

BINGO!