Basics: I just turned 40. I’ve been unemployed for about 9 of the last 18 months. Finally have a part time, minimum wage job. Looking for more work but can’t find anything yet.
I owe around $12-15,000 in unsecured debt.
I agreed to a program with Discover where they reduced my interest rate to 5.9% and automatically take their minimum payment from my bank account.
The other accounts are all several months behind.
I barely bring home enough to pay the discover bill, eat, and keep my car insured and filled with gas.
Now what? Do I answer the collection calls? Do I ask them to settle (and then try to scrape up money from family – or maybe my 401K which probably has around $6k in it)? or do I wait for them to offer settlement? If they threaten litigation, part of me just wants to say – “sue me. you can’t get what I don’t have.”…
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I’m going to suggest that you immediately consider bankruptcy and discharge this debt. At this point a payment plan with one creditor does not remedy your debt situation. You already say that this is one low payment and it is all you can afford on a monthly basis. That approach leaves the other creditors hanging out there and exposed for more abuse and getting sued.
I personally think that it can be more effective from a holistic point of view for you to close the door on the old debt with bankruptcy, stem the wave of collection activity and focus on finding new employment without all the stress and strain you are under now.
At some point your unemployment will run out and if you have not been able to find income by that time all the money you will have paid to Discover will have not resulted in you getting out of debt with them. You will then be faced with bankruptcy at that time.
I would suggest that you contact a local free bankruptcy attorney. Use the online directory of pro-bono bankruptcy lawyers to find someone to talk to.
Your situation is only going to change with the application of income, a payment plan feels good emotionally but is not going to result in what you want to achieve, the elimination of your debt of a razor thin income that is temporary.
Do not take the money out of the 401(k). That money is protected from creditors and you will lose about 30% of it in penalties and fees if you take it out now. Besides, it’s not enough money to resolve your entire debt situation, even if you wanted to settle.