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Discussion Starter #1
Hello everyone,

I am new here. I would like to run our scenario by the group and per the options below what is our best route to get out of our debt.

- Roughly 50K in debt (credit and personal loans.

1. Do I take a Chapter 13 and do the payment plan and live with the bankruptcy on my record?

2. We have approximateky $130 in home equity built up. I could refinance our home and eliminate these debts and start from scratch with better choices.

3. I have a retirement account that has over 100k in it. A withdrawal from this would essentially wipe it out considering the 40% penalty (30% tax and 10% early withdrawal)

Please advise. Any other suggestions are welcome. We are a small family with 4 total people (2 children)
 

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1. never take out of your 401K to pay debt. You are almost 40 and need the momentum of the compounding interest.

2. Never refinance your house to repay debt. Keep your 4 walls safe. If you refinance you are turning short term debt into long term debt.

3. bankruptcy is for no roads left to go down. Have you talked to the creditors,will they work w/ you.
Can you make a payment plan. Or is this debt so old its been sold. Because in that case you cant do anything about it.

$. How about paying it. Didnt you rack it up? Or the most you can of it.
 

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What is your income?
What is your monthly budget?
How much from your income can you throw at the debt?
Are you behind in your debt payments?
Do you have any other assets which you could possibly sell to help pay off the debt...such as land, houses etc.?
If you sold your house how much would you get from it that you could apply toward the debt...where would you live?
Is your spouse in agreement with any of the alternatives you have listed?
 

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If the equity in your home really is that high, and you can consolidate your debt onto your mortgage without extending the mortgage length and taking advantage of lower interest rates, then it's sometimes a decent option. I did it when I got into trouble more than 10 years ago, and it lowered my outgoings by 70% simply because the interest rate was so much lower. However, you have to be deadly deadly serious about paying, because your home is on the line.

I know this is not the same advice as someone above gave, but paying off $50,000 @ 13 or 14% Vs 3 or 4% is a big difference. Use the interest savings to pay off principle at a higher rate (don't fall into the trap of thinking you have extra money, which many people do and why the advice above says never do this).
 

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If the equity in your home really is that high, and you can consolidate your debt onto your mortgage without extending the mortgage length and taking advantage of lower interest rates, then it's sometimes a decent option. I did it when I got into trouble more than 10 years ago, and it lowered my outgoings by 70% simply because the interest rate was so much lower. However, you have to be deadly deadly serious about paying, because your home is on the line.


I know this is not the same advice as someone above gave, but paying off $50,000 @ 13 or 14% Vs 3 or 4% is a big difference. Use the interest savings to pay off principle at a higher rate (don't fall into the trap of thinking you have extra money, which many people do and why the advice above says never do this).
^^^^^^^
My advice, exactly.
 

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Discussion Starter #7
Thank you for all of the input. Most of our income is taken up by payments of this debt combined with the mortgage and car payments. There isn't much of anything left over to pay anything but the minimums.

Bankruptcy is a last resort for us and we don't feel we will need to go there.
The retirement withdrawal option really isn't much of an option either because of the huge hit and our age.
The best option may be to take it out of the home and work on a disciplined plan to move forward.
 

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I think your best option would be to pay off the debt with the snowball option. It really can be done. It takes a change in thinking but it is doable. Frankly, $50K isn't that much debt. There are those who have paid off much more.

DO call your creditors and lower the interest rate and stabilize the minimum payments. For instance, I think it is Chase that has the "Slate" program (think ... clean slate) where they drop your interest rate and make your monthly minimum payments exceptionally low. You may have to ask more than once to get put on this kind of program, but with diligence you will get connected to the right people.

When worse comes to worse, I'd rather have credit card debt than a mortgage. Depending on where you live, you might be able to sell your house, take your equity and pay cash for another place.
 

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When worse comes to worse, I'd rather have credit card debt than a mortgage. Depending on where you live, you might be able to sell your house, take your equity and pay cash for another place.
^^ Me Too!!! Could you possibly sell your house and cars and instead downsize and buy both with cash??
 

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Do NOT refinance your home to pay off this debt until and unless you have solved the problems that created the debt. Otherwise, you'll end up in the same place in a couple years. The very first thing you have to do is figure out how this happened and make the necessary changes to keep it from happening again. The snowball plan is a good choice. It is a painful process but its also a learning process. Hopefully the pain and the learning will get you on the right track for the future.
 
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