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You wrote, We now owe $20,000 to the collections agency who bought the debt...

Your husband's stupidly expensive car lost $20K in value that fast? Wow. I assume that includes some $$$ for expenses from the lender. Did you ever get any kind of accounting for the balance owed from the lender?

It might have been better if he had tried to sell the car instead. Of course that might have meant bringing cash to the deal - something I assume you didn't have. But I'm a little surprised that you'd owe $20K. Even if you sold a new $60K luxury car right after purchasing it, I wouldn't expect to lose more than maybe $10K on the transaction. At $20K, something doesn't smell right - or this must have been a really stupidly expensive car.

Also, Currently they have excepted 3 months of $100 a month and acccepted a payment plan for another 6 months of $100 a month. We've been paying this to avoid them from suing us and forcing us into bankruptcy because we can't afford a garnishment. But that's not even paying the interest.

Ah. I was wondering if you realized they might be able to garnish your husband's wages. In some states, that can be up to 25% of pay. But many have a lower cap or other restrictions on wage garnishment and a few forbid it altogether for consumer debts. Also the duration of wage garnishment orders is usually limited to a few years. In some states for some situations letting the debt go to judgment and even dealing with a wage garnishment might be better than going through a bankruptcy. For one thing judgments in most states stop interest from accruing or at least fixes the rate, often at something less punitive ... at least compared to things like credit card rates. You probably need to dig a little deeper and understand the details of what is law and what is customary in your state before deciding that wage garnishment is something to fear over bankruptcy.

Finally, What complicates matters is that my husband has an employee stock option plan, and will be offered an employee stock purchase plan in a couple of months, and we would hate to lose any proceeds that eventually come from this.

From my experience, you don't have to do anything with an employee stock option program until your right to exercise the option is about to expire. That means you should have some years to try to fix your finances before you have to worry about that.

You will need to understand the tax implications for both the stock option plan (if it is a qualified or non-qualified option plan) and how the company manages the option exercise. Also stock option plans for public and private companies tend to differ a bit since private companies can't issue shares to your broker. And if the company is private, you will need to decide if tying up your money in an illiquid stock is even a good idea.

Of a more immediate concern is the ESPP. That usually requires an employee to let his employer set aside a certain amount of their income - usually up to between 10 and 15% of their gross for between 3 months to a year at a time. You need to examine the plan and have enough saved to cover lost income for your first contract period. Once your husband gets his first block of stock you should be able to sell (assuming its a public company) the stock immediately to refill your savings.

And as aj485 said, you probably won't want to participate in the ESPP unless there is a purchase discount. Without the purchase discount, you could have just bought the stock on the open market at a time of your choosing.

- Joel
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