Dear Debt Adviser,
I have around $15,000 in credit card debt from college. I’m approximately five to six years from my last use of these two cards, which have since been charged off. Assuming the seven-year point rolls around, what are my steps to ensuring these charges don’t follow me?

I understand the immorality of not paying a debt, but I haven’t been able to save enough to really make a substantial effort in paying it off. I fear I will get caught in a never-ending, $100-a-month payoff plan.
— Kyle

Dear Kyle,
It sounds like you need some help with your savings plan. My guess is that if you haven’t been able to save enough in five or six years to pay off your credit cards, then I’ll bet you haven’t been able to save very much at all. So, let me tackle your savings issue first, and then I’ll get to your very correct fear of a long-term, dysfunctional relationship with the collections process.

Saving money is not optional. If you want to be successful today, you can’t just save what’s left over at the end of each pay cycle. You need to have a plan to spend, a plan to save, and you need to do the saving before you spend. Low savings will force you to use credit, and in your case getting new credit may be problematic every time you hit a bump in life. A car accident, mechanical repair, illness, leaky pipe … you name it. Without savings, how do you handle it? Not well. Especially as you get older and accumulate more bumps in the road of life.

My suggestion is to immediately begin to put away a set amount each pay period based on a spending plan that includes savings. Every time you get a raise, promotion, tax refund or birthday gift of money, I want you to put half in the emergency savings fund and keep half for current expenses. Saving money that you don’t have yet is my favorite way of accumulating six months of expenses in an emergency account.

Now, on to your debt situation: The seven-year period you are referring to is the time frame for reporting your credit card accounts on your credit report. Negative information generally must be removed after seven years. But you still owe the money.

Collections businesses are big in the United States. There is a large and active market in uncollected debt that is sold and resold as the debt ages to increasingly aggressive buyers. So you can expect to hear from debt collectors for a very long time after the seven-year reporting period is over.

Another time frame you will want to be familiar with is the statute of limitations, or SOL, for collecting debt in your state. However, if your debt is beyond the SOL in your state, collectors can still call you and mail you in an attempt to collect what is owed. You can tell them you know about the statute in your state and you have no intention of paying. However, they can just resell your debt to the next collector.

As I see it, you have several choices. You can wait for the statute of limitations to run out and ignore the phone calls and collection attempts from the collectors, you can deal with the collectors on your own or through an attorney, you can file bankruptcy or you can work out a way to pay what you owe.

For complete closure on this part of your financial life, I suggest saving as much money as possible for the next six to 12 months and then contacting the creditors to explore a settlement for the amount you have saved. Be sure to get any settlement agreement in writing before you make a payment. Should you be contacted by collection companies regarding the accounts that were settled, you will need to simply forward them a copy of the settlement agreement. Whatever you do, start saving seriously and you won’t have to fear collectors ever again.

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