Use cash to pay debt or purchase property ?

[Edward Prochilo]

I need advice on how to proceed financially. Until two years ago I paid all my bills on time and had a credit score of around 730. Then I had several financial setbacks and couldn’t afford my bills anymore. I stopped paying on all my unsecured debt one year ago but continue to pay on my secured debt and monthly bills, and now have a credit score of around 500. I just now have a current cash flow of maybe $400/month. I am looking at making a hardship withdrawal from my 401k in January under the new laws going into effect at the beginning of the year. This should give me about $25,000 after taxes and penalties to utilize. What would be the best use for it? Do I settle on a portion of my delinquent debt, hopefully bringing my credit score back up? Do I pay off some of my up to date debt which could net me another $500/month cash flow? Do I purchase property for a lower cash flow but also gain a cash producing asset?

I have been trying to break into REI for several years. I took several classes on wholesaling but have not been able to make a successful deal. That strategy does not seem to be for me.