Wake Sleeping Dogs Slowly

Tammy wants to know what she should do about really old debts that don't show up on her credit report. Should she pay them?

QUESTION: Tammy on Facebook wants to know what she should do about really old debts that don’t show up on her credit report. Should she pay them? Dave advises cleaning up her current debts first and then waking up the old ones one at a time.

ANSWER: What I recommend in situations like that is the first thing you do is clean up your current debt—debt that you’re active with. Work the debt snowball and clean up all debt except old debt. Once you’ve gotten past that, then do another debt snowball of the old bad debt. Call one at a time, wake them up, and settle the debt with them. Always do it in writing. And you’ll have to settle it because some of them may be trying to collect $30,000 on a $3,000 debt because they go crazy with the fees and make up crap and put it on there. We’re not going to pay whatever they say, because that’s not what you really morally owe. You’ve got to ascertain what you really owed and try to offer them that or less—whatever money you have—settle the debt for that, get it in writing before you give them any money, and then give them the money. Keep a copy of your check, cashier’s check, or money order stapled to a copy of the letter for the rest of your life.

You need to go back and settle them for two reasons. One is it’s morally correct to do so. Two is they’re going to haunt you. It’s going to pop up at the worst possible time. There is a statute of limitations in a lot of states on how long someone can chase you for a debt, but there are so many acid tests that have to be met on that, and you owe the money. It’s going to cause you problems from a practical, legal, and moral standpoint, so go back and clean them up.