It can happen to the best of us-we lose a job, fall on hard times and our bills go unpaid. But many of us opt to simply ignore our debts instead of coming up with a plan to either repay them or make them go away legally. Many of us mistakenly believe that debts will just go away after a lot of time; but this proves a bad strategy especially during a recession. Here’s why:
- Creditors never forget. Remember, unless you’re talking about a small mom & pop operation that shuns the use of computers and databases, most creditors have sophisticated processes and systems for tracking and following up on delinquent debtors. Some are even getting sneaky and pursuing debtors after they receive a bankruptcy discharge, which is illegal and can result in punishment for the creditor.
- Waiting for debts to just “disappear” can be stressful. When a debtor owes money they are very vulnerable. Until the statute of limitations runs out the creditor has the right to sue the debtor and use aggressive collections actions such as wage garnishments to secure repayment of the debt.
- Lawsuits, wage garnishments and asset seizures can happen quickly and even if the debtor files bankruptcy afterwards, it takes time to get their assets back if they were seized by the creditor before the bankruptcy filing. If a creditor gets an opportunity to seize your assets before you can file bankruptcy, that loss of money or property can cause a domino effect that could make you destitute. For example, many creditors use bank account seizures to secure payment from debtors they have successfully sued. If the debtor was dependent on that money to pay their rent/mortgage they could end up on the streets even if they file bankruptcy later.