If you’re thinking about dipping into your retirement accounts to pay off your credit cards, think again. Even if your lenders agree to take only 50 cents on the dollar to settle your debt, understand what you are giving up when you make such an agreement.
Many IRAs and other retirement plans are protected, or what we call “exempt property,” in bankruptcy. This means that while they are listed as assets on your bankruptcy petition, the bankruptcy trustee will not look at it as an asset to distribute to creditors. Under certain circumstances, your retirement will be fully protected in a bankruptcy while your credit card debts are be fully discharged. While it depends upon the particular facts of your case, the potential for substantial debt relief is real.
Before you act, know whether you’ll have to pay any penalties or fees for taking out from your retirement funds to make debt settlement payments. Also, any debt that is “forgiven” by a lender is reported to the IRS, and can result in additional tax liability. However, debt discharged through bankruptcy is excluded from the general rule for reporting canceled debt as income.
Consider all of your options and all of the costs involved before you embark on a debt management plan. Attorney Weber, at the Law Office of George H. Weber, LLC can review your situation during a free consultation and advise you as to your options, and the consequence, of a variety of debt relief options.
If you’re thinking about dipping into your retirement accounts to pay off your credit cards, think again. Even if your lenders agree to take only 50 cents on the dollar to settle your debt, understand what you are giving up when you make such an agreement.
Many IRAs and other retirement plans are protected, or what we call “exempt property,” in bankruptcy. This means that while they are listed as assets on your bankruptcy petition, the bankruptcy trustee will not look at it as an asset to distribute to creditors. Under certain circumstances, your retirement will be fully protected in a bankruptcy while your credit card debts will be fully discharged. While it depends upon the particular facts of your case, the potential for substantial debt relief is real.
Before you act, know whether you’ll have to pay any penalties or fees for taking out from your retirement funds to make debt settlement payments. Also, any debt that is “forgiven” by a lender is reported to the IRS, and can result in additional tax liability. However, debt discharged through bankruptcy is excluded from the general rule for reporting canceled debt as income.
Consider all of your options and all of the costs involved before you embark on a debt management plan. Attorney Weber, at the Law Office of George H. Weber, LLC can review your situation during a free consultation and advise you as to your options, and the consequence, of a variety of debt relief options.
