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Credit Education > Debt Management Help > The Time to Stop Paying Debts

The Time to Stop Paying Debts

By Janet Lacey
Published: Wednesday, December 30th, 2009

Living debt free is the dream of indebted individuals. Those who just started participating in the financial market are advised to do the same thing, aim to be debt free. However the financial landscape has been remodeled by many socio- economic phenomena such as the global recession. After the recent recession, many individuals have chosen to get debts just to meet their needs. Even those who entirely do not know where to get the money for paying these debts are currently indebted. The cash crunch in the current global economy has made managing debt and being debt free relatively more difficult.

In the United States alone many households are experiencing heavy debt loads. Many houses are being foreclosed and credit card accounts are being defaulted. It can be said that the American economy is experiencing one of its most trying times. The combination of credit crunch and cash crunch has forced many borrowers to stop striving to be debt free. Being debt free in this economic situation is near impossible because of a simple reason- no one can live without getting debts. These unpaid debts are responsible for the drastic lowering of many credit scores and the worsening of many reports.

There are still those who have saved up enough through the years and are still financially able even in this situation. It is advisable for those who can pay to pay their debts, but there are situations where paying debts is entirely unadvised. There are four situations where an indebted individual should stop paying his or her debts. Borrowers should stop paying debts that will not immediately affect their credit reports and scores. Borrowers should not stop saving for retirement plans just to pay off debts. Paying off debts out of retirement savings is strongly unadvised. And lastly, stop paying debts when it is blatantly hopeless.

Indebted individuals should first pay off high interest debts. Nondeductible debts and high interest debts can make the life of the borrower a real financial nightmare. Debts like these tend to pile up and neglecting them will simply speed up the process. Many borrowers are making the mistake of paying off debts that have higher value for example mortgage. These borrowers do not know that mortgage loan are deductible loan and are usually low interest rated. Paying this off before bills like credit cards and medical bills is a bad managing debt attempt because the neglected bills will pile up easier and will eventually make the borrower indebted more compared to his or her mortgage.

It is a fact that time flies by too fast, those who generate income today will not be able to do so someday. Spending retirement funds just to pay debts is a bad idea and practice simply because a retirement fund will be the only income of a person nearing retirement in just a few years. Paying debts in exchange of retirement funds will definitely increase the credit score of the borrower but it will certainly make the future of the borrower less secured. And lastly, debts should be accepted when it is past the time that paying for it makes sense. A lot of debt payers even pay their debts past the time where a financial recovery is still possible. When this time comes paying the debt will be useless and it is even probable that bankruptcy can be the best option of the borrower.

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