Help!

[C6Guy]

Not sure if I'm in the right sub forum but I'm looking for advice and if I'm in the wrong place please move this to the right thread.

Almost seven years ago I was involved in a situation that led to me receiving a judgement against me. I never contemplated bankruptcy however never got in contact with the other party to try to settle the debt. The other day I got a notice from my employer that starting in July they were going to garnish my wages. Obviously afraid of what the might mean for my finances I went to an attorney that's going to work with me on a settlement.

I was brain storming for a few days trying to come up with a solution and was wondering if someone can help chime in.

My two options are:t

1. Get a personal loan from my credit union.

2. To get a loan from my 401K (I called earlier asking about the penalties, and was informed that since I am only borrowing the money I am able to escape any tax liabilities and just as importantly would be paying the loan back to myself with interest. So I would just loose out a bit on possible investment returns)

My idea and I want to figure out if this is possible is to take out the loan to
satisfy the judgement settlement if one can be reached.

Once that occurs I would then use a balance transfer check to pay off the loan and then keep it and pay it off within a year with the 0% balance transfer offer I have from my new card. I wanted to ask if this is possible? As I'd like to make amends take care of this and move on with my life. It is literally one of the last blemishes of my past and I'm sure it's the reason my score is still in the 680's. Thanks in advance for all your responses.

[gdale6]

If it were I, option 2.

[IamB2]

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@gdale6 wrote:

If it were I, option 2.

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+1

I second that.

Most 401K plans allow you to borrow up to 50% of the value of your 401K plan value. If that value would cover the amount of the judgment (or settlement amount), I'd definitely select option 2. This means you pay interest to yourself.

Depending on how your 401K (when invested) performed over the past few years, you can determine if this option would be your best one. If the Return on your 401K was more than the interest rate on the personal loan you'd get from your CU, then I'd chose option 1.

[keithB]

They wouldn't be garnishing if they didn't have a judgement in hand - so seven years ago they got a judgement and you did nothing about it?

Bite the bullet, get the 401k loan - you can't have it both ways, unless you can win the lottery between now and then =/

Most likely, they wont go for "a settlement" too much in your favor.  Why should they?  They know where you work - they incurred expenses to track you down and get a judgement against you.  Perhaps you can work a deal for the full amount vs. garnishment installments but don't expect a sweetheart deal. 

Just make sure you get the debt wiped clean in your credit reports.

[C6Guy]

Option 2 seems to be the clear choice winner and most likely the method I will go. My overall
Performance has been around 10% year over year so I'd be cutting that in half. But I wouldn't mind that to have that chapter in my life completed.

To KeithB my attorney discussed that the judgement credit has most of the cards however also explained the nuclear option which is chapter 7 bankruptcy. He informed that many will settle out of fear of not getting anything back. We also discussed legal filings to lessen the garnishments so in essence it's guaranteed money or the chance of getting nothing. Ideally I hope an agreement can be reached.

[keithB]

I would say if it's the original creditor going after you, you have an uphill battle.  But if you are dealing with some vulture that bought your debt, you might have a chance for a good settlement.  Find out for sure.  But a lot of these leeches hide behind a law firm and try to make you think they are working for the creditor when, in actuality, their firm bought your debt.  

I wish you the best of luck either way.  Just remember, that this situation just a small detour in the journey you have set for yourself.  You'll get through this and accomplish your goals =)

[C6Guy]

Thanks for the well wishes. I'm hoping for things to get resolved quick and easy with both parties being satisfied.

Also the reason I didn't take care of the debt is that it arose from when I was a teenager from helping out family who couldn't really handle the obligations I signed for them when I had great credit ... (Really the main reason for the troubles I had ) till I grew up had a reasonable income and could nip these things in the butt.

That being said does anyone know if you can balance transfer a loan? This might be an option but probably will still go from the loan and pay it off as I save the money. A lot better option then having to lose a quarter of my income.

[takeshi74]

You'd really need to check the BT terms for the account you intend to BT to.  A BT check should work but, again, read the terms.