Dear Bankruptcy Adviser,
It’s been more than seven years since my college credit card mistakes were made, and most of the bad marks on my credit report are gone. The statute of limitations in my state has passed, so I can’t be sued for those debts anymore. I was considering filing bankruptcy to try to start over, but now that I’ve done the research and realized these things, I’m wondering if I should bother. Realistically, I still can’t afford to repay those debts, but morally I am still bound to repay them. I’m struggling with deciding if it’s worth the expense and possible setback to rebuilding my credit to file bankruptcy at this point, even if it’s not affecting my credit anymore.
— Sam

Dear Sam,
I would say it is absolutely, positively not worth it to pay those bills or to file bankruptcy. Both would set you back even further as you try to recover from your past mistakes.

I guess I must be morally corrupt, but I don’t think you owe these credit card companies anything. And you owe the collection agencies that bought the debt even less. Yes, I suppose you should pay for your past mistakes. You did take out the cards and did spend the money on who-knows-what.

But the time for psychologically whipping yourself has passed. You need to rebuild a positive credit history — one that shows you have addressed prior errors and are no longer that irresponsible person from before. To do this, you cannot regress but must move forward.

As I have written before, our consumer-based society reaps no benefit by you living in the past. We need you to buy things in order for everyone to benefit — manufacturers, retailers, distributors, etc.

More people benefit from your ability to rebuild a positive credit history. Very few, mainly the owners of collection agencies and their employees, benefit from you paying back that past debt.

Let’s say you did pay back your creditors. First, the original creditor likely will not accept the money. It has written off the balance and sold it to a collection agency.

Second, since the statute of limitations has run out, making a payment only restarts the statute period. So unless you pay the balance in full or settle for pennies on the dollar, you would be liable for any remaining balance.

Third, paying those debts would not help your credit score. In fact, it would hurt it. Those accounts are so old now that the negative impact of the account is minimal. Re-establishing the account would harm your credit more than it would help it.

Fourth, bankruptcy would be the worst thing you could do at this point. You cannot be sued for the debts, so there is no benefit to you to pay them, but the bankruptcy would sit on your credit report for another 10 years!

Fifth, because the accounts are so old, you might be able to have them removed from your credit report entirely.

At this point, you need to get over your guilt, and rebuild your credit. That will be the best way to build a positive credit history.

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