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Of course, if you're struggling to repay your debts you might not want to buy anything that will improve your life – at least not until you get those debts paid off. A recent article on the website www.forbes.com made the interesting point that there are three types of debts you might consider not paying on. This is a pretty startling idea but the article actually made a pretty good case that there are debts you may decide to not pay on. This is because there are instances where you could do this without destroying your credit and risking an avalanche of calls from angry lenders. Of course, there is a caveat here, which is that you should not ignore your other debts. In fact, you should be paying at least the minimum on all of your debts and more if possible. This is especially true of those debts that would have an effect on your credit score.
An unsecured debt
If you find yourself in a position where you can't pay all of your debts you might consider stopping paying on one of your unsecured debts. These are debt such as credit card debts, medical bills, personal lines of credit and old cell phone bills. They are called unsecured because an asset does not back them. On the other hand, if you don't pay on a secured debt like your auto loan, which is backed by an asset, you could lose your automobile as the bank will repossess it. Don't get us wrong. We are not recommending that you stop paying on an unsecured debt as this would definitely have a serious impact on your credit score. But if you find yourself in a real bind you might think about not paying on some of your unsecured debts and not your secured debts so you don't end up losing a valuable asset.
A mortgage that's underwater
If your mortgage is underwater as a result of the great mortgage meltdown of 2007 – 2008 it might not be worth continuing to pay on it. If you're having a problem making payments on it as well as some of your other debts your best option might be to just walk away – especially if you're seriously underwater. While this will damage your credit score it might be better than wasting the cash you need on a house that may not be worth what you paid for it for many years. For that matter, if you're underwater by 25% and the value of the housing market where you live doesn't recover it would actually take you 12 years of payments just to get back to where your balance equals your property’s value
Really old debts
Did you know that federal law requires the credit bureaus to remove debts from your credit reports after seven years? Let's say that you have a debt that’s 6 1/2 years old. In this case, why pay on it when it's going to disappear in six months anyway? It's already done about all the damage it can do to your credit score and if you make a payment this will just reset the "clock" so your seven years will start all over again. Another thing to consider is that as debts age they tend to have less of an impact on your credit. The reason for this is that lenders tend to pay more attention to how you’ve handled credit in the past year or two than what you did five or six years ago.