Lost my job, have 30k in credit card debt and looking for advice

[idonthaveaname]

It’s been a rough few years, but after many challenges, I finally managed to get approved for several credit cards. During the pandemic and the last few years, however, I accumulated over $30,000 in credit card debt. Several months ago, I got a decent-paying job and developed a plan to pay off my debt, which I’ve been following closely. I haven’t had a late payment in years. I’m 41 and really want to avoid bankruptcy. Since I’ll likely need to move to a more affordable city and get a car, I can’t afford to deal with the long-term consequences of bankruptcy.

I have some savings that I’m currently using to pay rent until I can find another job.

I could sell all my stocks and dip into my 401(k) to try to pay everything off, but that would wipe out my safety net. Plus, I’d have to pay taxes on the early withdrawal, though the total might be less than what I’m paying in monthly fees.

I’m also unsure if I could get approved for a personal loan, and I worry about getting trapped with a new obligation that I might struggle to pay off.

Will any companies settle my account for less than the full balance if the account is still current? How much will this hurt my credit score? On one hand, my score is already lower because of the high balance, but I’m also on joint accounts that aren’t used and have high limits.

If I enroll in a non-profit debt management program, will that automatically close my accounts? If not, will it still lower my score?

I plan to call each company directly. I have more credit cards than I need, so if even one is willing to settle, that would be a big help.

Any advice? I’m feeling a bit worried.

[hdporter]

I'll suggest that debt settlement or debt management should be off the table initially.

 

Provided that you anticipate employment with most or all of your income restored, your best bet is to seek sufficient accommodation from your creditors such that your temporary income sources can meet your cash flow needs.

 

Under optimal circumstances, this can avoid default/charge off reporting that is a long term credit score killer.  This is particularly desirable because from what you write, you likely have reasonably strong credit scores now.

 

This isn't a path without footwork and a fair degree of patience-trying experience.

 

The most reputable creditors grasp temporary hardship.  If you express a proactive interest in keeping your accounts out of delinquency, and can document your unemployment, they will work with you to establish temporary hardship payment agreements to bring bridge your sccount through your hardship.

 

Such agreements typically start at 6 mo, and some will extend as necessary with continued documentation.  Payments may be reduced to cover finance charges, and the apr may be lower to as low as 6%, or sometimes eliminated.

 

Bottom line, if you successfully enter into such a program, required payments can be reduced to 1/3, or even 1/4, of their current amounts.

 

I'm going to break fir n I w, and continue tomorrow if you respond with further thoughts and suggestions.  (I'm bouncing around in a Lyft right now and I'm getting nauseous!  )