What should I do??

[Jetsetter]

I have a decision to make and wanted some guidance. Wife and I ran up $125K in CC debt over the past 10 years, primarily completing home improvements and paying for my mother's medical bills. We got buried to the point that I called and asked for hardship after my wife lost her job. Anyhow we have been paying back at reduced interest rates and the card companies have been calling asking if we want to settle for 50% of what we owe. Up until a few weeks back this was not possible as we were broke. However I was able to sell some company stock and now have the cash to payoff all of what we owe (about $100K). I am 100% willing to do this as I did borrow the money and always intended to pay if off. The temptation is to take the settlements and pay off only about $57K which would clear the debt. The question is would the $43K in "savings" be worth the credit hit I would take on my report? The wife’s debt would be paid in full so no issue on her report. Not looking for an easy way out as I am willing to pay 100% but is that a wise decision?
Thanks for any help.

[disneysteve]

I'm of the opinion that if you can pay your debts, you should pay your debts.

[minnie1928]

Also keep in mind that not only will your credit take a serious hit, but the amount of the write-off will be considered taxable income for this year. I say pay off the most advantageous accounts (the highest rates), create some degree of an emergency fund and then work on paying off the remaining balances.

[kork13]

Also keep in mind that not only will your credit take a serious hit, but the amount of the write-off will be considered taxable income for this year. I say pay off the most advantageous accounts (the highest rates), create some degree of an emergency fund and then work on paying off the remaining balances.

Ditto.

It's great that you have the money to repay your debts, and I absolutely agree--if you have the ability to pay them in full, you should. That said, however, take care of yourself FIRST before you take care of the credit card companies. Set aside a solid emergency fund (at least 3 months' worth, preferably around 6) so that you won't have to resort to debt if something unexpected happens in the future. Use what remains to pay off your debts, probably starting with the highest-rate debt first.

[cschin4]

So, you had the ability to sell stock? Did you have the stock when your debts where mounting? Why didn't you just sell them and pay off before the interest, etc starting mounting?

[Jetsetter]

So, you had the ability to sell stock? Did you have the stock when your debts where mounting? Why didn't you just sell them and pay off before the interest, etc starting mounting?

I had to wait until the stock was vested before I could exercise and sell.
I am planning to pay back all of the debt 100% and live a life of pay with cash or don't buy.
It's nice to have a second chance and I will respect the opportunity and not squander it.
Thanks for all of the advice!!

[naomibatac]

Good that your realization came before you run out of solutions. Having sound advice from members are truly very helpful and even those reading posts are being benefited by the experiences of others. I had that kind of problems before and now thankful that we learned to be frugal and use credit cards wisely and efficiently.

[bjl584]

Take the settlement. Use your wife's good credit standing for future loans until you get your credit built back up.

I usually tell people to pay back what they borrow, but if the lender puts a 50% offer on the table, then you might as well take it.

[mcfroggin]

Take the settlement. Use your wife's good credit standing for future loans until you get your credit built back up.

I usually tell people to pay back what they borrow, but if the lender puts a 50% offer on the table, then you might as well take it.

Morally I disagree with this, but finanically this advice is tough to turn down.

[JoshuaHeckathorn]

Take the settlement. Use your wife's good credit standing for future loans until you get your credit built back up.

I usually tell people to pay back what they borrow, but if the lender puts a 50% offer on the table, then you might as well take it.

I agree- I certainly understand the moral argument, but the lender is making a business decision to offer you a 50% settlement. You should look at their offer in the same light. Financially, it's the smart choice.

[LivingAlmostLarge]

Take the settlement. But realize the forgiven amount is taxable income and there will be tax on the stock. So you may end up owing the federal government instead.....

[Eric80]

the first place to start would be either going to the citizens advice bureau or speaking to debt advisor where they will be able to discuss a solution for you - such as consolidating your debt or maybe an IVA - i found them to be really good and honest which is always appreciated.