Should I take money from my 401k to pay 2 debts?

[sciachir]

Thanks again for all of your responses..  To answer.. Yes, I had medical insurance during the time both of these debts were insurred.  These were the co-pay balances I owed.  Should I contact both of the OC's and ask if I pay them, would they contact the CA and ask if they will they have the collection removed?  Again, I am all new to this, and have been trying to re-build my credit.  BTW, I can't afford to pay to find out what my CR shows.

I appreciate all of your replies..

[webhopper]

To find out what your Credit Report shows start with pulling your FREE Credit Report's from annualcreditreport.com. They tend to have more info on them than ones from a 3rd party. The Credit Reports from annualcreditreport.com, come directly from each of the CRA's. You can pull 1 Free Credit Report from TU, EQ and EX every 12 months.

Save your money and Don't Buy the Scores, they are what we call FAKO's.

As far as paying the OC,  that is what I would attempt to do FIRST.

[student-of-credit]

Hello! Sorry you are having financial difficulty. Here is what I think is biggest reason you should never pull money out of your 401(k) even if you have serious debt problems: By a ruling of the US Supreme Court, your 401(k) or any other ERISA retirement plan is immune to any judgement from creditors, even if you declare bankruptcy. (This is how O. J. Simpson supported himself after the judgement against him). This is a national ruling and applies to all states. If you have $100,000 in your 401(k) and declare chapter 7 bankruptcy, discharging all your debts, you will still have $100,000 in your 401(k). The only possible consideration added to this is if you have a spouse, and the 401(k) is community property, and if you get divorced, your spouse is entitled to a share.

[student-of-credit]

It is up to you, if paying a few hundred dollars settles your mind... But as a rule, do not raid your 401(k). By a ruling of the US Supreme Court, and in all states, the money in your 401(k) is immune to judgements, even if you declare bankruptcy. I was advised my lawyers on this.

[Anonymous]

No, please do not take from your 401K  especially for such small medical debts.  I've been in your exact situation and once I paid off my medical debt with the collectors they still wouldn't take the bad mark off my credit report. Any debt that goes to collections, like medical, will stay on your credit report for 5 to 7 years, even if you pay it in full right now or choose to set up small payments with the collection company.

Make a payment agreement with the collection agency even if it's $5.00 a month. Don't pay it in full using your 401K because it will still hurt your FICO for the next 5 to 7 years. I know from experience and felt like such a fool paying it off when I was financially hurting. They still dogged me and hurt my FICO. Thank goodness my medical debt has disappeared off my record and I have great credit now because the 7 years has passed.

Good luck with your job search if your looking and don't stress. If those two small medical bills are all you have to worry about affecting your FICO your still doing great.

Set up small payments and stick to what you can afford. If you pay out of your 401K you'll regret it because you'll see that paying it in full now won't make a difference. The debt has already been reported, they won't take it off your credit even if you pay it.

Even if you ask for help and agree with them to recall the bad mark on your report they will lie to you and agree to get the bad mark off your credit once you pay. The problem is they won't stand by their word. Once a debt has been reported to collections they either won't or can't take it back. Now if you would have made payment arrangements before it had been reported to the credit agencies you could easily avoid the debt affecting your score even if you paid $5.00 a month on each debt.

DO NOT TRUST COLLECTION AGENCIES AND THEIR PROMISES. ALL THEY WANT IS YOUR MONEY AS FAST AS THEY CAN GET YOU TO PAY IT BUT IT WON"T MAKE A DIFFERENCE TO YOUR CREDIT SCORE. AMEN TO THAT !!!

[Neat]

I agree with sjt, you may be able to take a penalty free distribution from your 401K for medical expenses exceeding 7.5% AGI.