some getting out of debt questions

[SomethingAnonymous]

I wanted to ask your opinion on here- we have a serious amount of debt (about $48k right now). About half is mine from my divorce and custody battle over my daughter, and half is my partners because of some car accidents and bad financial choices of his. Up until about April of this year we were unable to pay off anything, because our income barely covered just our basic needs. Now he has a new job and we have "extra" money each paycheck that can/will go towards debt. I think our expenses for come out to about $2,300 each month, leaving $1,400/month to go towards debt.

So my question is about a couple of the smaller debts:

debt #1: a client paid my partner for a website, the client turned out to be really crazy, threatening to sue us several times because he didn't understand how programming and web design works. I have written down that when they mutually decided to end the project because it was not working out, that this person had paid us $350 for work that wasn't completed. We have not heard from this person in about a year. Should we track them down and pay them this money back? In my heart I want to do the right thing, but also I am guessing this person forgot or didn't know about the money. I'm not sure. In order to get out of debt sooner is this a debt I should also just forget about?

debt #2: similar situation, my partner was working from home and not getting much done because the kids were so distracting, so we tried renting a cheap office for a couple months. It wasn't working out so we stopped.  I have written down that we owed the last months rent but were unable to pay it then. It's $280. I haven't heard from the lawyer he was renting the office from ever. Should we contact him and pay this or pay a debt that has interest? I guess my conflict is doing the right thing vs. the seriousness of our debt.

Also is it true that some debts can be so old you might not have to pay them anymore? We're in the US.

I've tried to do research on whether or not we should be looking into bankruptcy or just working on paying off the debt. I have not found any clear answers. What kind of person can you go to for advice on this? A lawyer of some kind?

Thank you in advance and sorry it's so many questions.

[althara]

I'd go with the Dave Ramsey school of thought on this one. If you owe the money you pay it. That doesn't mean you pay it right now though if you have other creditors breathing down your neck. If you have 1400/mo to put towards debt you can pay 48k off within 3 years (depending on interest rates). In that case there is no reason for you to file for bankruptcy. Bankruptcy is very very serious and hard to come back from financially for a long time.

Remember to have your baby emergency fund of $1000 and get current on all your bills that matter right now before you start paying down debts.

This thread might be helpful to you: http://www.mothering.com/community/t/1365084/getting-out-of-debt-in-october

The first post explains the Dave Ramsey plan in baby steps, and the people there are great support.

[SomethingAnonymous]

Thank you, that really helps a lot!

[crunchy_mommy]

I would pay off both. I'd be inclined to pay them off immediately, actually. The reason is... these are super small debts. The amount that would help with interest on your other debts would be minimal, whereas paying these off can really free you up mentally. It sounds like these small debts are weighing on you and it could be very liberating -- and motivating -- to wipe the slate clean and have 2 fewer things to worry about.

[SomethingAnonymous]

Ok I have a question- some of these letters from companies that now own the debts- the balances of the accounts have gone down with no payments made- why?

One month the settlement offer will be $500, then the next it will be $300.  And the actual balance goes down too. It's very confusing.

One letter came saying my partner owed $15,000 to Wells Fargo, and I asked him about it and he says he can't think of what it would have ever been from. Is there a way to find out? How do I even know these companies are legitimate?

ETA: I googled the company, Northland Group, Inc, and a whole bunch of results come up where people are saying it's all a scam.  Now I am even more lost than ever.

My dad said to check his credit report and see if it's listed there. If it's not, then it's probably a scam. Does that sound right?

Edited by SomethingAnonymous - 10/16/12 at 5:30pm

[SomethingAnonymous]

does any one know how the statute of limitations on debts works?

What state's laws apply? Does the SOL renew if you make a payment?