MARY HUNT: Which is worse: Bankruptcy or repossession?

Dear Mary: Which is worse, bankruptcy or repossession? There is too much negative equity in my car to sell it, and I cannot afford the payment since my husband passed away. The life insurance is not enough to pay all the bills plus the car. The finance company won't finance the negative equity so I can sell the car. Should I borrow the $12,000 from my 401(k), sell the car and pay the difference to the finance company? — Bettie, email

Dear Bettie: I am so sorry to learn of your husband's passing. I can't imagine having to face financial problems and deal with unspeakable grief at the same time.

As for your question, bankruptcy is a lot worse than a repossession, not only for your credit score but for your personal feeling of well-being. A bankruptcy becomes a public record and a kind of stigma for life, even though it is reported to the credit bureaus for only 10 years. Repossession would be reported to your credit file for up to seven years, and that's it. You do need to understand that if you opt for a repossession, the finance company may sell your car to the first taker, then hold you financially responsible for the deficiency amount.

If you were to take a loan from your 401(k) to pay off the debt, that could actually boost your credit score because the debt would be reported "paid as agreed." While my advice would be to take that loan, please understand that if you were to leave your job for any reason before the loan was repaid, it would become due and payable. If you could not do that, the remaining balance would be considered an early withdrawal, which would result in a penalty and taxes due on the remaining balance.

Dear Mary: Do you recommend gold as an investment? — Diane, Arizona

Dear Diane: It is always wise to diversify your investments over a wide-range of sectors. Allocating 10 percent to 15 percent of your portfolio to precious metals stocks or exchange-traded funds makes good sense to me. The reason you're hearing so much about gold and silver is that the U.S. dollar has weakened to the point of being on a collision course, while the U.S. debt has reached nation-destroying levels. Many people see owning some amount of physical gold and silver as a way to protect their net worth and a hedge against inflation.