401(k) loan

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I would do it in a flash. Your 401k program may or may not let you do any regular contributions while you have a load out, but any money you can invest should be put to the guaranteed 32% rate you'll effectively be getting by paying down those usurious rates. Joe W.

another option you can look into is prosper.com, a peer-to-peer online lending market. I wouldn't recommend it for lenders, but borrowers don't have anything to lose.

Technically of course if you can borrow at 9% interest to pay off a loan at 32% interest, it's a no brainer.

But if you don't address the structural issue that led you to this point in time, it's all going to be pointless.

First, you probably don't mean Chap 11 - that's a business reorganization. US Chap 13 is restructuring with a payment plan for individuals. (Chap 7 is liquidation for either individuals or businesses).

Second, if you are really are close to a bankruptcy, then *absolutely* do not touch that 401k. Thanks to a change in the law in 2005, repayment of 401k loans is permitted to be included in a Chap 13 plan, but I'd probably want to leave that to folks who *already* have the 401k loan. Do NOT take out a new one just before Chap 13. If you are seriously considering this, talk to a lawyer and soon.

Yes, of course, thank you :>

In my current situation there seem to be 3 ways to go...borrow at a lower rate and buy out the debts, enter into a DMP and negotiate lower interest or, finally, pursue bankruptcy.

I don't grok the "new" bankruptcy code, so I could be grossly over- or under-estimating the applicability of bankruptcy to my situation. I'd appreciate input, if at all possible, given the medium.

Going on my limited knowledge, the only reason I'd attempt 13 would be if there was no other way to reduce the interest to a reasonable rate.

Given the choices, it looks like a combination of a big buyout plus a DMP is the best way to go. I'll still have the same debt load, but at more tolerable interest rates. Then, the same monthly payments will serve to lower my outstanding balances, instead of paying interest.

And, as yourself and others have noted, I have to learn to curtail, perhaps eliminate, credit spending to realize long-term benefit.

Thanks...

How about transferring your account balance to another credit card company? I keep hearing these touts on TV about a teaser interest rate if you transfer your account.

It's my own fault, of course, but no way would I qualify for anything.

No "perhaps" about it. You have stop credit spending cold. Cash only from now on. Turn off the cell phone, cable, and Internet. No meals out. Start taking lunch to work. Learn to like red beans and rice. Get clothes from Goodwill (you can actually find some good stuff there). Trade your car for a 5 year old econobox or sell it and take the bus. Sell a bunch of stuff on ebay.

I don't know much about how you got in this shape, so the above may not all apply. But the principle does.

You need to get *REAL SERIOUS* about controlling spending or you will dig yourself an even deeper hole. I thought maybe you had got the point until you wrote "perhaps eliminate credit spending".

-- Doug

He doesn't need to do any of those things. A 401k loan would be appropriate in this case. Thumper

Thanks for the good advice.

By "perhaps eliminate," I mean, that I cannot see myself ever having enough disposable cash to buy a vehicle or a home outright. OTOH, these are non-issues as long as my work truck keeps running strong and I don't have to relocate for my job.

I also foresee having to cosign student loans for my younger children

- but fortunately that's more than a decade away. I just graduated the oldest from college so at least one acorn's off the tree.

I don't confuse those larger necessities with revolving credit, or small installment loans - both of which have proven to be my Achilles' heel. Your concern is unfounded - I get the point.