Do I cash out my 401k and suck it up or go into deed in lieu foreclosure?

Question

This is concerning the house in MI. My ex does not live there anymore but still has furniture in the house. I cahed out my 401k and am using $100,000 of my own money to pay for the remainder of the house. IN the divorce settlement I am to pay for the mortgage. I am concerned she will not do a foreclosure for it would wreck her credit too. Could I offer her some $ for moving expenses - she is asking me for MONEY! I have none. If I foreclosed...could I save my $100k and give her 10% so she feels she got something? I am more in this for me but don't want bad credit. It has been for sale for 3 years. It is selling for WAY LESS then what is owed so there is no reason to hold on to it but I hate to lose 100k of my own money that I saved for. I guess I have to be a man and walk w/ pride. You can always make more money right?! I just didn't know how bad my credit would be scorned from this, if she would agree and how to get her to agree? thanks.

Answer 1

I wouldn't let your house go into foreclosure that would be terrible on your cradit.  But then again if you take out your 401k you will have to pay the penalty and interest charges on it when you do your taxes.  So I would talk to a tax consultant about it.  H & R block has professionals that can give advice all year around, get in touch with them they can give you a free consultation.  If you don't have time to do that then maybe just go ahead and take it out (your 401k) ask if they can take all the taxes needed out first, then give the rest to you.  Talk to your ex wife or soon to be ex wife about how much she really wants or needs for that matter, and how much she is expecting to get out of all this.  if the number is way out of your price range then don't worry about giving her any right now.  Talk to your lawyer as well and see if you can't get her to settle with a little bit of your money.  I would make sure that she receives her furniture out of the house first that way she can't claim that you have stolen them or holding them without letting her get them.  It could cost you more money without trying to get her to get it out of there.  As far as giving your house up i wouldn't do it.  What if you need it after all this is all said and done.  What is gonna happen to you after you sell it?  Are you going to live in a crappy apartment for the rest of your life?  Or are you looking to buy something better.  Whatever the case maybe you should lease it out, rent it out.  that way you have some sort of payment for the house every month that you are not living there.  Just a thought, good luck and I hope this helps.

Answer 2

pay the house off. A deed in lieu will kill your credit for 5 years. Just be prepared to pay the penalty but see if you can get a loan on the 401k first

Answer 3

If the settlement says you are required to pay the mortgage, DO NOT cash out your 401K and take the huge tax hit.  Just continue to pay the monthly mortgage payments.  If she no longer lives there, you can rent the house out to recoup some of the money and sell it when the market bounces back.

Answer 4

Pay the house off.  You can always refinance the house years later if you need the money.  You can also sell the house and get your money back!!!!