Doug wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
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“Dear Steve,
I have lost my job, We have a huge overhead and with the current economy, we have tried, but unable to sell our house for loan value. Upside down with bills 4 to 5 times what is coming in. Applying for jobs but nothing yet and have depleted savings and 401 ks leaving early withdrawl penalties I can’t pay. Do I have any options to save my family?
Is bankrupcy my only option? I feel overwhelmed and fight the urge to consider cashing in on life insurance the bad way to take care of my family.
Doug”
The Answer:
Dear Doug,
Your situation is like this, you are crossing a financial desert and you are halfway across it. But you’ve managed to drain and use every bit of water you had, and even the water from the 401(k) as well. What are the chances of you making it the other half of the way across the desert?
The answer, not good. Draining assets without an endgame in sight just postpones the inevitable difficult choices that need to be made. If you had reached out for help earlier before you drained the 401(K) my answer would have been the same, bankruptcy. The difference is that back then if you had gone bankrupt you would have been able to keep the 401(k) funds and not owed a big IRS debt because of the early withdrawal.
I don’t say any of that to make you feel bad, but to help someone else that might be facing the same situation as you.
I predict that once you face the situation with bankruptcy that you outlook on life and your chances of a better future will improve. They usually do.
Look for a local bankruptcy attorney and go in and have a free chat. Ask all the questions you can think of and then go home and decide if bankruptcy sounds like a reasonable solution for you based on your situation.
My concern is that even with bankruptcy that your basic living expenses may exceed your family income. In that case, a job, any job, will be critical. You might even have to take some crappy temp jobs just to earn some money. That’s what I did when I was in that situation. It sucked but sometimes you do what you’ve got to do.
