Ask The Get Out of Debt Experts Retirement Related

Am I Crazy For Wanting to Pull All My Money Out of My Retirement to Get My Financial Life Straightened Out? – Josh

“Dear Damon,

I am a 28 year old teacher. I have been out of college for about 5 years now and I have a very large student loan debt of about $70,000. Due to other financial burdens I neglected to pay my student loan payments for years.

My student loans we turned into a collection agency and I have recently started paying those payments ($445 per month). As of two weeks ago I have a garnishment on my wages of about $630 per month, which is a lot more than I can afford.

The garnishment is through Dell Financial/WebBank and the total amount is about $2000. I also have a $520 debt to AFNI Collection Agency (original creditor AT&T) which can be settled for only $100. The largest debt that I have other than my student loans is to First National Collection Bureau Inc for $9,800 (original creditor CitiBank).

This debt was previously owned by Midland Funding LLC which I disputed in court but their lawyers never showed up for court so the case was dismissed. I am an honest guy who wants to do the right thing but I am so deep in debt that I can’t make all of these payments and still afford to live.

My questions:

1. Is there anyway that I can get the garnishment amount lowered? This garnishment took place in court without me being present to defend myself or disputed the amount of debt owed.

2. I do understand that my CitiBank account needs to be payed but they are asking for well above the orginal debt. How can I settle this debt at a much lower amount?

3. I have been working now for about 5 years and I have about $15,000 paid into retirement. Would it be a bad idea to pull money out of my retirement to pay off all of my debt in lump sums? Here is my plan:

Dell Financial- Garnished Debt Total $2000 @ $630 per month. If I could pay in full with my retirement money then I would have the MUCH needed $630 in income to pay bills.

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AFNI- Total Debt $520. They will accept $100 to pay off the debt.

First National Collection Bureau Inc- Total Debt $9,800. Original Creditor Citibank. Original Debt $6800. I would like to negotiate the amount of this debt. I am willing to pay a lump sum of less than $4000. What would be a good starting point to negotiate the amount I am willing to pay?

I guess my big question is, Am I crazy for wanting to pull money out of my retirement to get my financial life straightened out and get and respectable credit score?

I would like to pay off this $12,000+ debt in lump sums with around $5,000-$6,000 out of my retirement money.


Hello Josh,

I first need to clearly disclose that I am not an attorney and am not able to give you legal advice. You can inquire at your local court house about no or low cost legal aid and perhaps get help with a procedure to file a motion to challenge the garnishment.

Regarding the pulling money out of retirement option, that really depends on who you ask. Some same never touch it, some say go for it, I say it depends.

It seems to me that this garnishment is the most pressing because that is hindering your ability to pay your basic bills. Have you tried contacting the attorney directly, explaining your situation and asking if they can cut the payment in half? Have you looked at your state garnishment law and confirmed they are not taking more than the maximum allowed?

How old is the Citibank debt?

What State do you live in?

Remember when you withdraw from the 401K you have to plan for the taxes and penalties, unless you are going to attempt to get a loan from your 401K. Have you inquired with the HR department to see if they have a borrow provision?

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In total, how much if any can you afford to set aside on a monthly basis to pay down the 2,000 and the 9800 dollar debt.

How steady is your income? Do you think it will increase in the next 6 months to a year? Do you have the ability to get a part time job for a short time?

The 100 dollar settlement on the 520 account is a no brainer and I would take it all day long as long as you get it in writing first. No Paperwork = No Deal.

Do you have any other resources for potentially coming up with money other than taking it out of your 401K? Anything stored in your garage for years that you can put on craigslist and start chipping away at this 50 bucks at a time?

If you can answer these questions in the comments below I can get a better idea of what you are dealing with.

Damon is a talented independent debt coach that provides in-depth assistance and consultations for people struggling with debt. If you want a personal debt coach to help you through a difficult situation or want assistance to find secret discounts offered by debt settlement companies I think Damon Day is an excellent person to contact for advice and assistance. He can be reached directly at

If you have a debt related question you’d like to ask, just use the online form.

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Damon Day

Damon Day is a talented Debt Coach who offers fee based consultations to consumers as an alternative to the typical free debt relief consultations which are nothing more than thinly veiled sales pitches lacking any real information to help a consumer make a good decision. You can learn more about how he can protect you from getting ripped off at

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