Just Divoirced 14K in cc debt Settlement

[Macexcel]

I am trying to find out how I can settle my debt with CC Companies.

I have 2 CC one with 5K and one with 9k.

I have great Credit, and never missed a payment. I have heard that if I start missing some payments not past 150 days, that I would be able to offer a settlement with the Credit Card company.

I would be looking at cashing out a 10k 401k to help to get rid of this debt, just looking to start off fresh.

Any thoughts or recommendations?

Thanks for any feedback
MAC

[BlackDiamond]

14K is not worth ruining your credit over by taking all of those late payments hits and settling an account, IMO. I had over $25K of debt last year and considered this, everyone told me not to and got me on the right track and I'm down to $12,500 on one personal loan. IT IS POSSIBLE.

Taking your 401K is a bad move. I would not do that unless you were starving and had no possible other way to get income.

Can you give us a better idea of your overall financial situation? Are you unable to make even min payments? I can't think of any other reason why you'd even be considering ruining your credit over $14K.

Is the interest rate insane? Have you tried to consolidate or balance transfer?

What is your income vs. debt each month? Can you make more money by taking a second job or selling items?

What do you have to show for the $14K of debt? In most cases, not all but most, high debt is racked up because people bought luxury items they really could not afford. Sell some of them.

Stop using the cc, and live below your means.

[karenkc]

14k isn't so much that it's worth settlement imo. I paid off 12k in cc debt this past year on a low income. I basically gave up everything I didn't need. It's not fun but it's worth it in the end. (I used the balance transfers offered by new credit cards to have no interest for a long time while I paid.) IMO the great thing that comes from paying the debt, as opposed to settling or bankruptcy, is you learn how to handle money in a much better way. Often, when people declare bankruptcy they eventually get into an equal or higher amount of debt again. It's like the lesson is bypassed.

[disneysteve]

Originally Posted by Macexcel

Any thoughts or recommendations?

Yes. Pay your debts. Don't search for ways to get out of them. Cut out every penny of unnecessary spending. Get another job. Sell anything you can live without. 14K isn't a lot of money. And cashing out your 401k should never be an option. Besides, if you have 10K in the account and you cash out early, after taxes and penalties you will only end up with about 5-6K.

[wincrasher]

The only way you are going to get a settlement is to wreck your credit in the process. Even if you got a 50% discount, it would not be worth it in the long run.

I can understand your desire to start fresh after a divorce. It's probably a painful reminder to make those CC payments each month - probably from debt incurred by your ex.

An option may be to borrow against your 401k rather than cash it out. It does lock up the money you are borrowing to the bond funds, which have lower rates. But you do pay interest back into your account. There are also limits to how much you can borrow - think its 50%. Cashing out your account is difficult unless you quit your job, plus the taxes and penalties will wipe you out.

Good luck.

[jIM_Ohio]

Focus on income and spending first, then debt repayment second.

Don't cash out 401k
consider a 401k loan if you can pay it back within 12-18 months.

I would do the following:

List 3 things
income
expenses (budget)
debts

each of those is independent of the other 3. List each on both a monthly and annual basis to make sure you did not miss things like car registration, taxes, bonuses and similar.