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janecun
Posts: 5
Registered: ‎02-23-2010
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Divorce and Debt Settlement

After getting divorced in March at 38 years old, and having $42,500 of debt that needs to be settled given that I can't even make the minimums each month, I would like to know how much worse my FICO is going to get and for how long. Equifax was a 632 in march and is now a 574 Trans is 632 was 687.

I have a decent job ($50,000) but have three children to support and have been considering cashing in my retirement to pay off my debts, rather than debt settlement. To do this, I would have to quit my job and relocate to another state to work since I am paying into a private retirement system. Has anyone made this kind of choice and if so, was it wise or unwise? Should I take the risk of quitting a decent job and starting over elsewhere to get out of debt or should I just do debt settlement and have no effect on my retirement.


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Valued Contributor
IOBA
Posts: 2,691
Registered: ‎08-13-2009
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Re: Divorce and Debt Settlement

My suggestions - 

 

* no, do NOT quit your job!

* put together a realistic budget of living expenses

* look what you can cut back on/delete, ie: cable, cell phones, etc

* redo the budget and see what you have for disposable income

___

* make a list of your bills, balances, etc

* call the creditors up and explain that you have x amount of money per month to pay x number of creditors.  You would REALLY like to pay your bill with them and would like to know what they will work out with you.  I have helped family go from $1500 a month payments down to $274 a month payments.   That is the most dramatic example I can offer.   Some creditors will offer zero interest for 6 months, or a lower rate with a 5 yr pay off plan, skip a payment, etc.   The best thing to do is know where you stand financially and talk to your creditors.  :smileyhappy:

* be prepared to discuss your income, your expenses, and your assets.  I would not mention the retirement plan since you can not access it.  If you can, reduce what you are paying into the system to the bare minimum being matched by your employer.

 

Make a plan, make a goal, go for it - :smileyhappy:   

 

Current and future creditors, possible landlords and employers, look more favorably upon someone who paid their bills than those who don't.

Senior Contributor
O6
Posts: 3,626
Registered: ‎10-13-2009
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Re: Divorce and Debt Settlement


janecun wrote:

After getting divorced in March at 38 years old, and having $42,500 of debt that needs to be settled given that I can't even make the minimums each month, I would like to know how much worse my FICO is going to get and for how long. Equifax was a 632 in march and is now a 574 Trans is 632 was 687.

I have a decent job ($50,000) but have three children to support and have been considering cashing in my retirement to pay off my debts, rather than debt settlement. To do this, I would have to quit my job and relocate to another state to work since I am paying into a private retirement system. Has anyone made this kind of choice and if so, was it wise or unwise? Should I take the risk of quitting a decent job and starting over elsewhere to get out of debt or should I just do debt settlement and have no effect on my retirement.


I would be very careful in the choices made.  Giving up a job these days is not something to be taken lightly.

 

You mention about $44k in debts.  Could you break those down?  Some debts, like child support, almost never go away and ignoring them could land you in really hot water.  Others, like unsecured debts, can probably be negotiated for a lower payoff / reduced interest rates.  Depending on what type of debts you have and how precarious the situation is, bankruptcy could be an option. 

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haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007
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Re: Divorce and Debt Settlement

I wouldn't hit the retirement funds. The penalties are killers (including surprise increases in your tax bracket.)

 

At 38, you don't want to be starting from scratch, especially since you're currently on your own.

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