Do I Still Need to Pay This Debt?

Know when you owe and when you don’t

Lynnette Khalfani-Cox

En español

Published February 22, 2021

10 Questions

Do I Still Need to Pay This Debt?

[ {
  "question" : "Which of these debts is not discharged in Chapter 7 bankruptcy?",
  "answers" : [ {
    "answer" : "Credit cards",
    "correctAnswer" : false
  }, {
    "answer" : "Student loans",
    "correctAnswer" : false
  }, {
    "answer" : "Child support",
    "correctAnswer" : false
  }, {
    "answer" : "Medical bills",
    "correctAnswer" : false
  }, {
    "answer" : "Both B and C",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "A University of Michigan Law School study shows that bankruptcy among older Americans doubled from 3.5 percent to 7 percent from 2002 to 2010, making this group the fastest-growing segment of the population going bankrupt. But contrary to popular belief, bankruptcy doesn't automatically wipe away all your financial obligations. With Chapter 7 bankruptcy protection, credit card bills, medical debt and personal loans can be eliminated. However, student loans, child support, existing court judgments and certain income tax liabilities will remain. Also, under a Chapter 13 bankruptcy filing, you simply reorganize your debts; then you repay some or all of what you owe during a three- to five-year period.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "When a debt is really old, what happens if the statute of limitations has expired?",
  "answers" : [ {
    "answer" : "You don't need to pay the debt.",
    "correctAnswer" : true
  }, {
    "answer" : "You could still be sued and forced to pay what you owe.",
    "correctAnswer" : false
  } ],
  "multiSelect" : false,
  "explanation" : "Once a debt reaches its statute of limitations, creditors can't legally come after you and force you to pay an old bill. They can't sue you in court and win a judgment; nor can they garnish your wages or seize assets, such as bank funds.\n\nStill, it can be tricky to know exactly when your legal obligation to pay a debt is over. That's because each state has its own rules, and different statute of limitations apply to different debts, such as oral contracts, written contracts, promissory notes (such as mortgages) and open-ended contracts (for example, credit cards or other types of revolving credit). Generally speaking, a statute of limitations can be as short as three years or as long as 15 years. If you have a question about when the statute of limitations on a particular debt expires, contact your state attorney general's office for the law in your area.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "Your Social Security check can be garnished for:",
  "answers" : [ {
    "answer" : "Student loan debt",
    "correctAnswer" : false
  }, {
    "answer" : "Federal income tax",
    "correctAnswer" : false
  }, {
    "answer" : "Child support",
    "correctAnswer" : false
  }, {
    "answer" : "All of the above",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "When a creditor or debt collector wins a court judgment against you, that judgment specifies how much you owe and permits the creditor or collector to get a garnishment order against you. The garnishment instructs a third party, such as your bank — or your employer, in the case of a wage garnishment — to turn over funds from your account (or your paycheck) to pay the debt. In most cases, your Social Security check can’t be garnished. The exceptions are for student loan debt, federal income taxes and child support.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "If your home goes into foreclosure, the bank can sue you to recover its loss.",
  "answers" : [ {
    "answer" : "A. True",
    "correctAnswer" : false
  }, {
    "answer" : "B. False",
    "correctAnswer" : false
  }, {
    "answer" : "C. It depends on where you live.",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "If a bank forecloses on your home and ultimately sells it, your financial obligation after that process depends on the state where you live. Residents of \"non-recourse\" states, such as California and Texas, are protected by laws that forbid lenders from coming after you for the difference between what the home sold for at auction and what you owed.\n\nIn \"recourse\" states, such as Florida and New Jersey, lenders can pursue you for any negative difference or \"deficiency\" between the foreclosure sale proceeds and the loan balance, plus foreclosure costs.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "Which age group has the most credit card debt?",
  "answers" : [ {
    "answer" : "Thirty-somethings",
    "correctAnswer" : false
  }, {
    "answer" : "Forty-somethings",
    "correctAnswer" : false
  }, {
    "answer" : "Fifty-somethings",
    "correctAnswer" : true
  }, {
    "answer" : "Sixty-somethings",
    "correctAnswer" : false
  }, {
    "answer" : "Seventy-somethings",
    "correctAnswer" : false
  } ],
  "multiSelect" : false,
  "explanation" : "People in their 50s have an average $8,364 in credit-card debt, according to credit rating company Experian. Those in their 30s have an average $5,563 in plastic debt. Average debt rises to $7,922 for people in their 40s, and those in their sixties have an average $6,832.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "Credit card debts that are charged off have to be repaid in full.",
  "answers" : [ {
    "answer" : "True",
    "correctAnswer" : false
  }, {
    "answer" : "False",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "Even if credit card debts are charged off, they can still wind up in collections, marring your credit report and potentially exposing you to lawsuits from creditors. The good news is that once a credit card debt has been charged off, or written off by a creditor as uncollectable, you typically have more negotiating leverage if you want to offer a lump-sum settlement and repay some or all of the charged-off debt.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "Will delinquent or defaulted student loans ever go away?",
  "answers" : [ {
    "answer" : "Yes",
    "correctAnswer" : false
  }, {
    "answer" : "No",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "Student loans are one form of debt for which there is no statute of limitations. This means creditors have the right to pursue you for years — even well into retirement — if you have unpaid college loans, including those you may have cosigned for your children or grandkids. So delinquent or defaulted student loans never simply go away. You must take steps to remedy these past-due bills. Different procedures are required to fix overdue federal loans versus delinquent private loans.\n\nAccording to the U.S. Department of Education, you have three options for getting a federal loan out of default: repayment, loan consolidation and loan \"rehabilitation.\" The latter involves making on-time payments for at least nine months. To clear up a delinquency or default with a private lender, you have to go directly to that lender or your current loan servicer and work out a repayment plan.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "When your mate owes money, are you also on the hook?",
  "answers" : [ {
    "answer" : "Yes",
    "correctAnswer" : false
  }, {
    "answer" : "No",
    "correctAnswer" : false
  }, {
    "answer" : "It depends on the loan.",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "Just because your spouse owes money doesn't automatically mean you owe it too. But if you are a cosigner or joint owner of credit or a loan with your spouse, you are both individually and jointly responsible for repaying that obligation. Any failure to pay the bill could jeopardize each of your credit ratings and subject you both to potential lawsuits by creditors seeking repayment.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "If your ex-spouse racked up debt, can creditors come after you?",
  "answers" : [ {
    "answer" : "Yes",
    "correctAnswer" : true
  }, {
    "answer" : "No",
    "correctAnswer" : false
  } ],
  "multiSelect" : false,
  "explanation" : "Creditors can also legally pursue payments from you for debt incurred by an ex-spouse if you cosigned for the debt. It doesn't matter how long ago you divorced, what your divorce decree says, or if your former spouse was the only one who racked up the debt. If you both signed on the dotted line, you are each legally responsible for that obligation. Furthermore, in some states, medical bills generated by an ex-spouse can also come back to haunt you if those bills were incurred while you lived together.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
}, {
  "question" : "When your past-due credit card debt has been resold to a collection agency, does the agency have a right to collect?",
  "answers" : [ {
    "answer" : "Yes",
    "correctAnswer" : false
  }, {
    "answer" : "No",
    "correctAnswer" : false
  }, {
    "answer" : "It depends.",
    "correctAnswer" : true
  } ],
  "multiSelect" : false,
  "explanation" : "When old credit card debt has been resold to a collection agency, that agency may or may not have the right to collect. If the statute of limitations on the debt has expired, the debt is no longer legally enforceable. But that won't stop some debt collectors from seeking money from you. They're hoping you don't know your rights, so naturally, they won't mention that the law no longer requires you to pay.\n\nAdditionally, many states require collection agencies to be licensed. If they're not, they don't have a right to collect. In any event, if a company or individual you don't recognize demands payment on a credit card bill that was due to another business, ask for written proof of the original debt (that is, the original loan application or contract with your signature) and written proof that the company or individual has a legal right to collect any past-due money owed.",
  "hint" : "",
  "hintLink" : "",
  "questionImgCaption" : "",
  "questionImgCredit" : ""
} ]

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