Stuck: Debt repayment options

strawberry_fool · #1 (**permalink**) 08-12-2009, 07:43 AM

Hello,

I have $9,500 in credit card debt all on an Amex Blue card which I received about 8 years ago with a fixed APR of 9.99, which was unfixed and raised to 12.99 last October and will again be raised to 15.26 this coming October. My minimum payments are currently around $200 and I'm paying $350, about as much as I can currently swing each month.

Also have around $20,000 in student loan debt, the payments are $130 a month.

I tried applying for a 0% offer from my bank last year only to discover that my parents debts (including 2 accounts listed as bankruptcy/charged off) were being reported as mine. My father and I share the same name. Still working to this day to get them removed from my credit reports. Extremely frustrating, even though my debt-to-income ratio is not great I always pay on time and more than the minimum.

I'm in my mid-30's, make $55,000 annually, rent in the city, don't own a car, ride my bike to work, don't have cable... Can't find any more places to reduce monthly expenses. Could potentially save a couple hundred on rent by moving to a different neighborhood but still have 8 months left on my current lease.

I know its a common question but I am considering withdrawing a 401K account and possibly throwing some of my savings at my credit card also. I have $8,000 sitting in one account from a previous employers plan that I've not rolled over into my new employers plan. I know I can only expect around 60% or so after penalty and taxes, and I have $3,000 in an ING savings acct.

Not sure its the most financially sound decision but part of me feels like it would be worth it just to be able to sleep better at night and be free of the credit card companies' grip.

Any advice, tips, options I haven't considered?

Thanks in advance.

sapphirecapital · #2 (**permalink**) 08-12-2009, 06:27 PM

leave the 401k alone, negotiate the Amex Debt, you may get a discount and get the credit file fixed, probably together with your dad. Look into a possible arangement of your student debt, some may be waived. Remember whatever it is you do not have to pay is a taxable income.

Debt_mgt · #3 (**permalink**) 08-17-2009, 11:37 AM

Please don’t ransack your 401K and take those penalties. I wouldn’t empty the savings account either. That is your safety net. AMEX has been aggressively closing accounts and lowering credit limits, so you can’t count on having the card later if you need emergency funds. If you haven’t asked them for a lower rate, you should do so. Even then, you are paying extra, and working the debt down. At 15.9% you will be done in less than 3 years if you continue to pay $350 a month.

Have you been given the option to close the account and keep the current rate? That is a normal practice when a creditor is raising your rates. Keep in mind that doing so could lower your score for a while.

I’d be interested to know what you are doing to remove your father’s information from your credit report. Are you fighting with the creditors or with the credit bureaus? I may have some suggestions for you, depending on what stage and strategy you are using.

Curtissmith · #4 (**permalink**) 08-17-2009, 03:29 PM

So you have 8000$ sitting in a savings account makeing what 3% interest? And you owe 9500$ your paying 15%. Take the savings and pay off the debt. Take the payments of 350 a month and put it back into savings.

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