Need advice on a settlement offer… More responses plz?

Base your offer on the original amount; it depends on how delinquent the account is and what State you are in as to how much to offer.

How delinquent is when you last made any sort of payment.

The State will determine if you are running close to the Statute of Limitations for the debt.

It really doesn’t matter if you use USPS or another delivery service; that’s up to you; but, yes, get delivery confirmation either way.

Should we bust open a 401k to get out of debt?

Here’s the situation: Currently we owe our kids’ private school $17k for the 2005-2006 school year. They have been very patient, and while we’ve been paying $1600 every month for the kids’ education, that all just went to LAST year’s tuition, which just got paid off. We haven’t even STARTED paying this year’s tuition, even though the school year is over in two months. It needs to be paid and we can’t afford to keep making payments on top of what we need to pay for next year. This is a religious school and it is not optional for us. The $17k INCLUDES a substantial scholarship (three children). (Big comfort: Next year the oldest will start public high school, and the middle will homeschool, so the bill next year will be much lower–about $1000/month.)

On top of that we just found out we have to pay $2300 in taxes.

We have paid all the credit cards off by getting a loan from family, which we are paying back at the rate of $300/month until we can pay more, eminently reasonable.

We have about $60k in a retirement account–the only nestegg we have. We have very little equity in the house, not enough to take a loan off. We’ve shaved our budget as low as it can go.

The question is: Should we tap into the retirement account? We calculate that in order to get the $20k that we need to pay off the school tuition and the tax bill, we would need to take out $26k to cover taxes and penalties. $6k is an awful big hit to take, but it would eliminate all debt except what we owe family. We might be able to take a couple hundred a month and put it into a CD, in order to re- build some of our savings.

I should mention that at some point in the next ten years or so, we are expecting to inherit at least $100,000, and probably quite a bit more. Nothing to plan on, but nothing to ignore either. That will be able to be invested into retirement planning.

My husband thought that maybe we should take out another $5k to pay off an old car loan, so we can have that much more financial freedom, but I’m already VEEEEERY leery about taking ANYTHING out of our very last nestegg.

What do you think? Any and all advice would be SO appreciated, I really do not know where to turn and can’t decide on my own what to do!

Thanks so much!