If you are in debt and you are paying it down ahead of schedule, you’d assume that you are being successful in your debt repayment journey, right? Well, as someone who’s climbed out of over $120,000 in debt, I can look back now and say that I could have done a few things differently. The biggest mistake I made was not knowing the rights I had as a debtor to either negotiate, challenge or understand the circumstance under which I don’t have to pay a debt.
I can think of two specific types of debt where I might have acted a little wiser.
1) Really Old Debt
My husband had a private school loan that was over 15 years old. In my frenzy to get out of debt, I contacted the school to try and negotiate the $12,000 bill down (about $8,400 was interest.) I thought I was so smart to offer them $3,000. They came back and said they would need at least the principal balance of about $3,600. I was stunned by my negotiating expertise. I had just saved us $8,400! Or did I?
Little did I know, the statue of limitation on that debt had passed and technically we did not have to pay! The statue of limitation in regards to debt just means that after a certain amount of time, a debtor cannot sue you for a debt. The amount of time varies from state to state. They can try to collect on it, but there’s not much else they can do. Most people opt to safely ignore this type debt without any impact on their credit report or immediate financial situation. If you’ve got old debt, check this chart out to see if it’s past the statue of limitations for the state you live in: http://www.nolo.com/legal-encyclopedia/statute-of-limitations-state-laws-chart-29941.html
At the end of the day, I am not terribly upset that that we paid it off. We actually did have the means to pay without doing broke, so we did. But there are times when it might make sense to take advantage of laws that give you a break based on your individual situation. You never want to skip out of debt you owe but in extreme circumstances you may have to get a break.
2) Debt Gone to Collections
In our more unstable days, we did have some debt that went to collections. It was the kind of scummy debt that people typically negotiate down pretty easily: gym memberships, cell phone bills, etc. I didn’t know that once a debt is in collections, the collector is really happy to receive any payment (within reason.) This gives you, the debtor, an opportunity to negotiate a debt down. In the beginning of our debt repayment process, I paid full balances to debt collectors, until I got hip to the game. If I could go back to the beginning, I would have tried to negotiate any debt in that went to collections. I think I overpaid on this debt by about $1,500.
As I mentioned in another Principles of Increase post, many times debt can change hands and the original amounts and promissory notes are not in the creditor’s file. This leaves a lot of room for error. Balances can be padded, inflated and just plain made-up. So, don’t feel bad if you have to negotiate this kind of debt downward. The amount you are being quoted could be wrong anyway. (Debt collectors don’t have the best record with accuracy.)
Don’t Make Any More Debt Repayment Mistakes
I made these mistakes, but you don’t have to. If you are in debt you desperately want to get out of, here what I recommend:
- Get some guidance and support in this process (mostly free or low cost.) If you want to get out of debt, the first thing I would recommend is getting a copy of Total Money Makeover, by Dave Ramsey. This is the plan we used to get out of debt and it will help you avoid amateur debt repayment mistakes like the one I made.
- Find a support system of like-minded people who will help and encourage you on your journey to get out of debt. I’ve got a FaceBook group that you can join, but there are countless forums, discussion boards and meet-ups centered around debt dumping you can participate in as well.
- Finally, firm up your commitment to get out of debt by drafting a plan. I’ve got a FREE five-day email course you can take that will help you get this plan going. Once you get that in place, you’ll have the next steps and resources at your finger tips for a successful debt repayment journey.
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