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We are in a pretty dire situation credit card-wise and need some advice. About 18 months ago we bought a foreclosed home for cheap. Being a forclosure it needed extensive work. We ran up over $30000 in credit card debt fixing it up. All debt was put on a few different zero interst cards with the intention that we would pay them off last fall when our old company sold and we would get money from the sale of company stock. Well, due to the economy the company did not sell and now we have $35000 on credit cards with interest rates ranging from 5% to 22%. We make only a bit over the minimum payments and are paying approximately $450 per month in interest. My question is this - do we sell our stock options (assuming we can find a buyer) and forfeit any future gains to be debt free or do we gamble and hang on to the options? SUPPOSEDLY, the options will be worth 2-5 times what it is now ($60k -$150k) but there are no guarantees. Also, it might sell next year or in 10 years...we don't know. Money is very tight due to this high debt and life is stressful. Any advice would be greatly appreciated.
I think you need to figure out what your stock options are currently worth - will they cover the debt? Waiting around for the options to increase while carrying 20% debt on over $30K sounds like a formula for disaster. You've already been burned once on a supposition - maybe you shouldn't be gambling.
I would prefer that the OP anaylze their current cash flow situation, NOT the raw numbers of interest. I have been amazed at how few people actually look at their monthly in-flow of cash and see how that stacks up against their monthly obligations. If the cash flow allows for a portion to go to savings and a portion to go to current expenses and a portion to service debt that is NOT a dire situation!
If the inflow is NOT ENOUGH to cover those THREE AREAS you have a problem. If you have to "short" you savings for a period that might be OK, especially if you have illiquid assets. (Employee options are not nearly as easily traded as actual stocks...).
If your debt is increasing that is bad.
If you cannot cover your current expenses that is DIRE.
Look at you total cash flow BEFORE you think of using any assets (no matter what) to cover mere interest. If you "imputed expected return" on the options is greater than the cost of debt service you are actually not in bad shape.
Most competent brokers can use the resources of their firm to show you a range for which third party options are trading(which is not the same as market traded options / futures!!!) further you need to understand the limitations of the grants on the options to know is they can be exercised -- many options are restricted as the firm wants you to be on staff for X years.
I would prefer that the OP anaylze their current cash flow situation, NOT the raw numbers of interest. I have been amazed at how few people actually look at their monthly in-flow of cash and see how that stacks up against their monthly obligations. If the cash flow allows for a portion to go to savings and a portion to go to current expenses and a portion to service debt that is NOT a dire situation!
If the inflow is NOT ENOUGH to cover those THREE AREAS you have a problem. If you have to "short" you savings for a period that might be OK, especially if you have illiquid assets. (Employee options are not nearly as easily traded as actual stocks...).
If your debt is increasing that is bad.
If you cannot cover your current expenses that is DIRE.
Look at you total cash flow BEFORE you think of using any assets (no matter what) to cover mere interest. If you "imputed expected return" on the options is greater than the cost of debt service you are actually not in bad shape.
Most competent brokers can use the resources of their firm to show you a range for which third party options are trading(which is not the same as market traded options / futures!!!) further you need to understand the limitations of the grants on the options to know is they can be exercised -- many options are restricted as the firm wants you to be on staff for X years.
Chet here probably has the least reputation for the number of posts he makes, but that's because he gives you the hard truth. To fix any problem, the first thing you need to do is ask the right questions and diagnose what the real issue is, and what your actual options are for dealing with them. "Maybe my options will go up" is not a viable solution.
If you can cover your debts, do it. If you have zero debt, you can make adjustments to your lifestyle in order to save and rebuild a secure fund. You're paying $5K a year in CC payments, without reducing your principle. Pay that $5K to yourself, in a savings plan.
You borrowed $30K with the assumption that you had the $30K to repay it. Now do it, and don't look back, and learn from your past mistakes.
Make an offer of ten cents on the dollar, tell them when you can pay that amount, if they do not accept that negociation, tell them you will have take what little money you have and hire a lawer for bankruptcy.
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