Ask The Get Out of Debt Experts Divorce Retirement Related

I’m Divorced and Can’t Dig Myself Out of Debt. – Rich

“Dear Steve,

Divorced last summer. Split credit card debt. No assets besides my vehicle, and I rent an apt so don’t have any home equity to work with.

Now have $32000 in CC debt, highest rate is 7.9%, total $751 in monthly payments.
Also have $23000 401k Loan at 4.5% (takes 215 out of check every 2 weeks) but this money is almost gone.

I still have $30000 in pension for my job for a little retirement money (I’m 35), and considering the following to get my financial life back together:
1. Take 9k more out as 401k loan to meet my 401k’s plans requirements prior to distribution. Pay off a recent $4000 13.9% interest credit card debt incurrend when my car died. (not counted in total 32000 low interest CC debt). Use the rest to pay off a small chunk of the 32000.
2. Take the early hardship distribution on the remaining $32000 of my 401k to knock down the Credit cards as much as possible and start over. I have good credit score now, around 715, and afraid of what debt settlement options might do to my credit.
3. (I should be able to knock down the remaining CC debt after 401k distribution taxes, as I will be a getting a bonus from my job to cover the rest)

Should I liquidate my 401k, or do I have other options?

Rich”

Dear Rich,

You need to file bankruptcy to deal with the debt and leave the 401(k) money protected from your creditors. Click here to find a local bankruptcy attorney you like and go talk to them.

Tapping 401(k) money to pay bills is not wise. Don’t do it.

It’s easy to rebuild credit after bankruptcy.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

READ  Unemployment and Parkinson's Have left Us in Debt. Should We Use IRA Money? - Mary



About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

Leave a Comment

Scroll to Top