whether or not i should pay off my debt

[jpg7n16]

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.

So you don't care about morals, the world's not fair - so why not screw someone else over?, and you didn't make a late payment for 10 years, so you've earned a free $20k. Is that what you're saying?

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.

It's just as much the bank's fault as mine (even though it's not really), so I'm allowed to screw them out of 20k. Everyone else is doing it, so why not me? the banks are gonna get theirs anyways, so why can't I get mine?

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.

More and more reasons why you're going to settle regardless of the moral/ethical implications of doing so.

(fyi - you don't have to pay the entire debt right now. You can pay over time and still fulfill your obligations. -ie. pay 8k this month, and 350/month until it's gone. The choice isn't between, lose everything you have in the bank or settle.)

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 already know you're going to settle. I can tell from your post.

I feel debt settlement has a place in our system for those who need debt relief. And you are not one of those people - you have the means to repay. (I don't argue against your short sale, because at that time you were in need of debt relief)

But what you're doing now is in my view, very selfish.

So I've said what I wanted to say, you know where I stand. Good luck to you.

[disneysteve]

the main response i am hearing has to do with morals and ethics and legal obligations.

What else is there?

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.

I agree. Mortgage lenders made millions of bad loans and they knew they were bad loans when they made them. The system is broken in that regard. However, I still feel that the ultimate responsibility to determine if you can afford a loan is you. If you knew that you couldn't afford the loan, you shouldn't have taken it. The bank didn't force you to sign the mortgage agreement.

i am interested in settling my debt because it simply makes the most financial sense for me.

Sure. Borrowing $25,000 and not paying it all back is a great deal. That doesn't mean you should do it.

i should meet my financial and legal obligations, especially when i have the means to.

Exactly. This is the only statement that matters. You know right from wrong. This is right. What you are proposing is not.

How any of this will affect your credit score is completely irrelevant. You shouldn't make choices and decisions based on how FICO will judge them. That isn't what matters in life, not in my world at least. I think defaulting on debt is dishonest, unethical and illegal. I'm not even sure that a CC company will agree to a settlement when they see that you have 25K in savings, but that is beside the point.

[Snodog]

I know this is not what you want to hear but if it were me I would pay my debt if I had the money and chalk it up as a lesson learned.

It's been said that experience is the toughest teacher because you get the test before you get the lesson.

[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.

[littleroc02us]

After reading these posts I can see why we elect the people we do. I strongly believe it's because most of us need baby sitters for we are uncapable of making smart financial decisions and need the gov't to bail us out for them. Personal responsibility is slowing dissapearing and it makes me sick, but that is what we all truly want subconciously. I for one blame no one expcept myself when I went 50k in debt. I didn't blame the credit card companies or the auto industry. I dug my feet in and paid off those debts in 4 years by working my butt off and checking off each debt as I destroyed them. I have my own brain and am totally responsible for my actions. Therefore one of my main goals in life is to build my own personal wealth without the gov'ts help and to give back to the poor. The bible states "The rich rule over the poor and the borrower is slave to the lender."

[bjl584]

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]

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]

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]

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]

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]

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.