You can decide to settle your debts or not pay at all depending on your situation and what you are trying to accomplish. Some debts will fall from your credit report after a certain period of time.
Features
If you decide to settle your debt you will be able to pay less than the full balance. When you decide not to pay all your creditors or collection agencies can still come after you for the debt. They can start legal action and garnish your wages or bank account.
Function
When you settle a debt the forgiven portion may have to be reported as taxable income if it's greater than $600, on line 21 of form 1040. For example, if you owe $6,000 on a credit card and settle for $4,000 you may have to report $2,000 as taxable income.
Time Frame
A debt that has been on your credit file for seven years will fall from your credit report. You may not want to pay or settle the debt if it is close to expiration.
Significance
If the statue of limitations has passed, a creditor or collection agency will not be able to win a judgment against you in court. They can sue you but they cannot win if you show up in court on the date of the trial and show proof that the statue of limitations has passed. This statue will vary from state to state.
Warning
If you decide not to pay or settle a debt, your credit report will be negatively affected.
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