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I’m Draining My SEP Retirement Funds to Keep Up My Credit Score. – Diana

“Dear Steve,

At over 50 with excellent credit score and lines; self-employed for 25 years until recent couple of years (digital age/economy caused inability to rebound thus far), and after a nasty divorce over 5 years ago (which started the debt cycle – he dragged me through court), and a relo back home to Michigan (in 2005), I find myself trying to pay (on time, etc. — and I’ve been actually doing it, but by also draining my SEP (retirement) fund(s) (for which I’ll have to pay tax on!) — I find that I still don’t have very good employment prospects, even though I’ve spent hours trying (applying online, as well as making calls, etc.) (have a Bachelors, etc.) that I don’t know how/when I’ll totally sink.

Am hitting that point right about now. I visited a bankruptcy attorney earlier in the year; he said I should file, and that it’d be a quick rebound. I shuttered, but have been told by others — even the state human services rep (I’m on food card only — no cash; I don’t qualify for unemployment, because I’ve been self-employed all these years — with a loss for the last two!) that I should file.

It is not my style, but I find the credit card companies — as good of a payor I’ve been, and for how much interest they’re continuing to make off of me — to be in a win-win-win situation for them; lose-lose for me, i.e., stonewalled. No matter what I do — seems I’m screwed. With $80,000 in debt, a house (mortgage), son to take care of, and only $700/month child support — I need to know what my optiion are! I need help!

I understand how all this works — and I’m scared about the best option for me — personally. I’ve been an excellent credit risk forever, and still am; with promise to pay them. But will they indeed reduce my APR’s and either settle my amounts? or give me a decent re-payment plan? Or will this do more damage than just filing bankruptcy? (the cc companies have been paid on time — so now they say they won’t consolidate or settle or reduce my rate(s) AND they say they can garnish, etc. SO I’M CAUGHT? or am I ? PLEASE ADVISE,

Another Diana (single mom)”

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The Answer

 

Dear Diana,

The advice you got about filing bankruptcy was good advice. By taking money out of your retirement account, at a time when you are not earning money is, pardon me, foolish.

The issue really boils down to expectations. Is there a reasonable expectation you will be able to dig yourself out of this debt without draining your retirement account, and the answer is no.

The time has come for you to seek the legal protections you are entitled to under the law through bankruptcy. I would urge you to click here to find a local bankruptcy attorney you like. Make an appointment go in to see them. They won’t bite and I can assure you they won’t judge you. The bankruptcy attorney is there to help you.

Don’t take one more penny out of that retirement fund. As long as that money stays in the fund it is protected from your creditors and will be around to help you eat when you are old. If you do take another penny out to pay those bills I will have to hunt you down and kick you in the ass (in a loving way of course).

Don’t let your fear of the credit score let you continue to do things which are not helpful or healthy for your finances in the long run.

Big Hug!

Im Draining My SEP Retirement Funds to Keep Up My Credit Score.   Diana
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I'm Draining My SEP Retirement Funds to Keep Up My Credit Score. - Diana by

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • http://www.linkedin.com/in/thomjfox Thomas Fox

    Having excellent credit means nothing if one is so burdened by debt their lifestyle becomes compromised. While it is admirable to try and remain creditworthy, is it really helpful? Essentially, one becomes too concerned with maintaining the means to further the aspect of their lives causing them difficulty — getting into more debt. In this case, the level of indebtedness may have already compromised the credit score (Amounts Owed accounts for 30% of one’s credit score); therefore, this may be a moot point.

    There is NO shame in bankruptcy if it is an appropriate option. The system is designed to offer people a fresh start. No one gets into debt with the goal of bankruptcy; however, when so much stress is caused by one’s circumstances it is wise to act. It may be trite; however, life is too short.

  • another single mom

    Yes, but what action should I take prior to?
    Do I just stop paying my bills???

    Then they’ll hound me, too? Can’t stand for that — need quiet & to concentrate on my work, etc.

    I know if I keep paying my bills — on time, etc. — it won’t look like I’m having trouble, and won’t get the help (reductions in payments, interest, etc. — even temporarily!!!!!) if I do. The mortgage company has turned me down twice! and its like doing a tax return to apply !!!!
    I wasted my time — even though I’m not in default on anything yet at this point!!!

    Where is the PREVENTATIVE help? out there????

    What action do I take prior to filing bankruptcy — if I’m going to?????

    Call my creditors one last time? to WARN them? (probably not wise, don’t cha think)
    Another single mom with nowhere to turn, and needing answers!

    (i thought i had this all figured out, but the cc companies have lots of tricks and hold all the cards, it seems)…

    • http://GetOutOfDebt.org Steve Rhode

      There is no need to call and warn your creditors about filing bankruptcy. If you get a call from a collector you can give them your attorneys name and number. But the most important thing to do is to file. That bankruptcy case number that will be assigned once you do file will show the creditors you actually filed for bankruptcy and they will know what to do once you give it to them.

      If you have not found a local bankruptcy yet, click here to find a local bankruptcy attorney you like. Make an appointment and get the ball rolling, right now.

      Steve

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