Bankruptcy Or IRA Withdrawal: Which Option Is Better?

Bankruptcy Attorney Dayton, Oh

If you are struggling financially and you have an IRA with a decent balance you may be tempted to withdraw funds from this account to pay down your debts. This is usually a big mistake though, and it can have a big financial impact on your life and your retirement resources. You should never access retirement savings to pay on credit cards, medical bills, or other unsecured consumer debt except in very narrow circumstances.


If you are like most people you have always paid your debts on time, but circumstances beyond your control like a job loss or catastrophic medical emergency affected your ability to meet your monthly expenses and debt payments. You may feel that bankruptcy is not an option out of a misguided sense of shame, and prefer to pay your debts if at all possible. Withdrawing from your IRA is not usually a sound financial move though, and in most cases consulting an experienced bankruptcy attorney who specializes in debt relief  is a better option instead.


Will The Withdrawal Completely Eliminate Your Debt?


In a small percentage of cases it may be possible to pay off all of your debts using your IRA balance, and this may be a good idea if all the debts will be eliminated completely. If you have money invested at 2% but the interest you are paying is 17%-22% then using the funds to pay off the debt completely can be a wide move. If you plan on only paying off some of your debt then your IRA should be left alone, because you may soon find yourself falling behind on payments again and this time you will also have a much lower IRA balance as well. The taxes and penalties on early withdrawals can be severe. An experienced bankruptcy attorney can help you determine the best move in your specific case.


Will Bankruptcy Put Your IRA Balance At Risk?


When you file for bankruptcy protection you will need to list all of your assets and accounts, and this includes 401k accounts and IRAs. Under the bankruptcy code even if you have large balances in retirement account and these must be listed your creditors are not allowed to touch any retirement funds that you have. Bankruptcy will not place these funds in jeopardy but you could if you withdraw funds from the retirement account. The bankruptcy trustee will not touch any retirement accounts that you have, but any money that you withdraw from these accounts will become fair game. An experienced bankruptcy attorney can help advise you on the best way to handle your financial problems and get the debt relief that you need. This can be done without placing your retirement savings at risk.


The bankruptcy attorneys at Richard West Law can help with a free debt consolidation consultation so that you find the right answer for your unique debt problems and circumstances. Visit or call (513)771-8700 or (937)748-1749 to get the answers you want, and the financial relief you are looking for.

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