[KyDebt]

We were barely making ends meet before my husband (40yrs old) lost his job of 14 years due to cutbacks. His OT was cutout entirely 3 years ago after a co. restructuring. We did take $5K out of his 401K a little while after he lost his job 6 months ago. He was unemployed for 3 months, then found a job,then let go on the 80th day of 90 day probation because the co. didn't want to pursue the project he was working on. He was unemployed for 2 more months but now has a new job that seems solid. I work part-time while the kids are in school.
We are behind on our house payments,(2 mortgages) & approx. $50/55K in CC bills. It's been 6 months since we made any CC card payments, most have been farmed out to collection agencies or attorney offices, nothing officially filed against us YET. We just haven't answered the phone. We did contact a bankruptcy attorney who says file now. It'll cost approx. $2K plus go through credit counseling which we will also have to pay for another $300. New bankruptcy laws take the last 6 months of income and divide it out to be your monthly income. So with unemployment being the main source of income our avg. income is the lowest in our 16 years of marriage. One good thing on our side.
A friend says they got their CC debt reduced and paid 50% of the balance but credit report is still not great. Charge offs instead of bankruptcy.But they did keep their house. We called one CC but they would only offer 25% reduction and the full amount had to be paid in 1 week or no deal. So we decided no deal and they are calling the machine again.
We do have enough equity in our home that it will be taken if we file bankruptcy but we will get $18K from KY homestead exemption. But after the secured loans there will only be $5-10K to divide among the CC's. My husband does have a 401K, pretty large since he worked 14 years at the same place. It can't be touched if we file bankruptcy but we could pay part of our CC bills with some of it.
We are so torn at what to do. We have do do something! And now!
Anyone filed under the new bankruptcy laws yet? What is the thought on using the 401K? And how do you explain this to teenagers who already have some idea since dad lost his job and we get a lot of phone calls that aren't for them but don't know the severity of the problem, losing the house etc.
So...
1.File bankruptcy-No home or equity, no CC bills, BAD credit but $18K for house. But add relocation costs and we will probably rent since we can't get a loan on a house.
2.Pay off CC's with 401K, won't reflect as bad as bankruptcy on Report. Loss of 401K, but still have home and the equity in it.
Post your thoughts, experiences,any ideas entertained.

[RickJ]

I'd vote bankruptcy.

Even if you pay off the debt today, your credit will still suffer for at least a few years.

File bankruptcy and it will be 7-10 years... but you'll still have your 401k.

If it were just a few thousand in debt I'd probably suggest otherwise, but you're far beyond that.

[fredg]

Hi,
I would talk with a lawyer, experienced with declaring bankruptcy, to first learn about the new laws. I have no experience with them.
Then, declare bankruptcy, if the lawyer advises it.
A credit card debt this large will "eat up" any savings, depending on how much is in it.
I am sorry to hear that money has everyone upset, and I know it will all work out OK, but it's going to be very stressful.
You DO want to keep your 401K savings as long as you can. I am 63, retired now for family medical reasons, and am so very, very glad that I still have some left in my 401K plan... had to take out some last year to get by with medical bills.
Don't use your 401K, unless there is no other choice.

[CaptainForest]

I agree with rickj.

Declare bankruptcy, that way you still have your 401K.

[Ladymoonshiner]

We were barely making ends meet before my husband (40yrs old) lost his job of 14 years due to cutbacks. His OT was cutout entirely 3 years ago after a co. restructuring. We did take $5K out of his 401K a little while after he lost his job 6 months ago. He was unemployed for 3 months, then found a job,then let go on the 80th day of 90 day probation because the co. didn't want to pursue the project he was working on. He was unemployed for 2 more months but now has a new job that seems solid. I work part-time while the kids are in school.
We are behind on our house payments,(2 mortgages) & approx. $50/55K in CC bills. It's been 6 months since we made any CC card payments, most have been farmed out to collection agencies or attorney offices, nothing officially filed against us YET. We just haven't answered the phone. We did contact a bankruptcy attorney who says file now. It'll cost approx. $2K plus go thru credit couseling which we will also have to pay for another $300. New bankruptcy laws take the last 6 months of income and divide it out to be your monthly income. So with unemployment being the main source of income our avg. income is the lowest in our 16 years of marriage. One good thing on our side.
A friend says they got their CC debt reduced and paid 50% of the balance but credit report is still not great. Charge offs instead of bankruptcy.But they did keep thier house. We called one CC but they would only offer 25% reduction and the full amount had to be paid in 1 week or no deal. So we decided no deal and they are calling the machine again.
We do have enough equity in our home that it will be taken if we file bankruptcy but we will get $18K from KY homestead exemption. But after the secured loans there will only be $5-10K to divide among the CC's. My husband does have a 401K, pretty large since he worked 14 years at the same place. It can't be touched if we file bankruptcy but we could pay part of our CC bills with some of it.
We are so torn at what to do. We have do do something! and now!
Anyone filed under the new bankruptcy laws yet? What is the thought on using the 401K? and how do you explain this to teenagers who already have some idea since dad lost his job and we get a lot of phone calls that aren't for them but don't know the severity of the problem, losing the house etc.
So...
1.File bankruptcy-No home or equity, no CC bills, BAD credit but $18K for house. But add relocation costs and we will probably rent since we can't get a loan on a house.
2.Pay off CC's with 401K, won't reflect as bad as bankruptcy on Report. Loss of 401K, but still have home and the equity in it.
Post your thoughts, experiences,any ideas entertained.

Hate to say it been there done that... I would advise the later of the two...