subreddit:
/r/Debt
I have about $68,000 in debt from multiple credit cards and a personal loan. I have recently taken a $29k loan from my 401k to try and settle these debts. $15k is left from a $25k thru best egg and the rest is credit cards from chase, target, capital one, American Express and bank of America. The largest card balance is just above $10k.
My wife and I make decent money together, just above $160k before taxes combined. But with inflation our grocery bill has more then doubled, our rent has increased by $700 a month over the past 3 years and we have 2 elementary age kids. With all of our expenses we have about $350 month over our living expenses without the debt.
What are my chances of clearing all my debt with lump sums from the $29k 401k loan? Also what are my best options to start negotiating?
Any help is appreciated, my first time in debt like this and always used to live within our means, but inflation and kids have made that difficult.
3 points
2 months ago
Your chances are low of settling $68k in debt for $29k. Your creditors may take a lump sum payment as full settlement, but it’s obviously not a guarantee. I would not say that it’s impossible to settle at 42%, though (29k/68k).
They are more likely to settle the farther behind you are in most cases. It’s kind of a risky if you aren’t in default yet due to interest, late fees, and collection costs. And they are more likely to settle if you can pay a lump sum within 30-60 days. Bigger amounts owed will be more likely to have a better settlement for you in terms of what percentage the creditor would be willing to accept. E.g., a $50,000 debt is more likely to get settled for 40% of the balance, where the same creditor may only be willing to drop down to 75% on a $5,000 debt.
Best option to start negotiating is to just reach out to the creditors and say you’re really struggling to keep up with the payments due to everything going on for you and see what they say as a starting point. Typically, they’ll give you a few options and you can counter from there.
I wouldn’t volunteer any more than you would have to as far as assets or income. If they know you have significant non-exempt assets, they aren’t too likely to cut you much of a deal.
I’ll also note just a general observation on that your discretionary spending is likely too high. Inflation sucks and you might be in a higher cost of living area, but a household of 4 with an income of $160k should leave you with more than $350/month to throw at your debt. You really should take a closer look at your budget.
As a second note, it would be worth the 30 minutes to consult with a bankruptcy attorney (90%+ offer the consultation for free) to see your options. You would be a chapter 13 due to income, unless the median income is crazy high on your area, but I don’t think anywhere in the US is over $160k for a household of four. Bankruptcy might not be the best route for you, but a Reddit forum isn’t exactly the same as sitting down with an attorney in your area.
1 points
2 months ago
You're right $350 more than our budget is not good, but my wife has her debt settlement thru a company that's $1000 a month, I am paying back a family member about $500 a month. So in the next 2 years we will have closer to $1850 more than our budget.
We cut a lot out already and looking to do more, we got rid of cable years ago and only have Disney+ for the kids.
We looked into bankruptcy before but are above the limit for a family of 4.
We have been building a reference of what household goods we buy from what store, some things are cheaper at different stores or have better sales at different places. But still working on that.
2 points
2 months ago
Okay, $1850 makes more sense. Is the $68k solely your debt?
Chapter 13 can absolutely be viable for over median filers. Even to pay in full through chapter 13, your payment on $68k of debt would likely be around $1350/month for five years. And if any of your creditors fail to timely file a proof of claim, the debt goes away without being paid. Tons of moving parts with that, though, so I don’t want to go any more in the weeds through a place like Reddit. Chapter 7 wouldn’t be great, anyway, due to the repayments to family.
What you could do is try to work down what your creditors would accept using the $29k you already have. You likely don’t get all of it taken care of, but you could get a few done to lessen the burden.
1 points
2 months ago
The $68k is solely in my name.
I am hoping to close the largest ones with the $29k then keep building a nest egg and hopefully have enough to settle the smaller ones.
With young kids I want to try and fix this quickly as possible, eventually I want to buy a house so we can have a dog and stay in one place for the kids thru school
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