THE BLOG
05/24/2013 11:26 am ET Updated Jul 24, 2013

How Can I Pay Off Old Debts Safely?

Huffington Post Reader Question

I owe around $15,000 in debt for repossession and bank account from 15 yrs ago. Even a cell phone company plus doctor bills

I just recently found a good career type position. Now that im working who can I safely and trustingly call to pay off these?

I am not sure of each exact amount so who could help me without garnishing my wages

Mitchell

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Answer

Dear Mitchell,

Congratulations on getting the new job. That's awesome.

There is no one central place to go to get a listing of who you might owe. The best place to check is to get a copy of each of the three major credit bureau reports. You need all three because a single report may be incomplete.

The only way accounts appear on your credit report is if a creditors reports them to that bureau. A creditor typically reports to one primary bureau they have a relationship with.

While I prefer a consolidated credit report where the data from all three credit bureaus is merged into one report and it provides your individual credit scores. There is a charge for that type of report.

You can get a free copy of your credit report from each of the three main credit bureaus once a year by visiting AnnualCreditReport.com

Getting at least an annual credit report on a regular basis is a good idea to watch for errors or indications of identity theft. If you spot any errors you don't need to pay for credit repair. Just follow the step-by-step plan in this free guide.

While tackling the old debts is an admirable exercise you have two ways to deal with them. The first way would be to pay them in full. In that case the debt will remain on your credit report and show it was delinquent in the past but is now paid in full.

The second way would be to settle the debts for less than you owe but for an amount that is agreeable to both you and the creditor.

In that case the debt would continue to show the delinquent history, the part you paid would show as paid and the part forgiven would be show as a forgiven bad debt. Any amount of debt forgiven may be taxable if you are not insolvent. For more on this see this guide.

But before you contact any of your creditors to talk about offers you might want to take this time to start saving as much cash as possible to use to either pay or settle the debts.

Keep in mind that depending on what state you live in these debts may be so old they have expired under the statute of limitations or are time barred. That just means if they are the creditors could no longer sue you over the old debts.

For specific information if these debts are outside the statute of limitations you should make an appointment with an attorney licensed in your state and discuss your specific situation. There are a number of factors that can impact the clock stopping and stopping on the statute of limitions so getting specific advice is important.

If you meet with the lawyer and learn the debts are expired you have two choices at that point. You can go back and repay those debts as I suggested above or you can just set your sights on the future and start saving money towards an inevitable retirement and building an emergency savings account.

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