Ask The Get Out of Debt Experts Retirement Related

Should We Settle Our Debt By Taking Money Out of Our IRA? – Laura

“Dear Steve,

My husband and I currently have 45,000 in credit card debt between 3 companies (5 cards). I lost my part time job last year, and since November we have been unable to make the minimum payments. We are now at 120 days late and we don’t know what our options are, or what to do. Two of the companies say the are willing to settle with us for 40% of the balance, (which we will have to take out of our IRA to pay them). Our current balance does not allow for payments on the credit card debt, but it is paying for all of our needed expenses, ie mortgage, food, utilities, etc.

What do you suggest we do? Do we settle with the companies, or do we have other options? My husband is afraid that they will try to take our home or garnish his wages…..what do you suggest?

Laura”

Dear Laura,

My personal opinion is that it’s NOT a good idea to do that. Not only will you have to pay taxes and a penalty for taking your money out, but it’s only a partial solution and you’ve already said the budget is tight as it is. And then you have to consider how you’d be able to save that money again in your current situation.

I think you are much better off seeking protection under a Chapter 13 bankruptcy. Using that approach you will be able to protect the house, avoid lawsuits and wage garnishments, and the IRA money is protected from creditors.

Before you do anything, click here to find a local bankruptcy attorney and go talk to them. Bankruptcy is a legal process that affords you the most amount of rights and protection. You need to explore that option.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.




About the author

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.

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