How IRA Accounts Affect Debt Settlement

Let’s say that you have $100,000 set away for your retirement, and because of your current financial hardship you have $30,000 on your various credit cards. Additionally, you were out of work and have recently started working but don’t make as much as you used to.

Unfortunately, this scenario sounds familiar to many Americans today. The numbers may vary but the fact is many people have survived an unemployment (or underemployement) situation in the last two years by relying on their credit cards. As the debt has accrued, the monthly payments have been steadily increasing and can continue to increase as the credit card issuers adjust the interest rates.

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Eventually, many people consider credit card settlement as a way out from under their debt. But, what about that 100 grand in the IRA? How can you claim to your creditors that you can’t pay if you have these assets?

Well, the quick answer is you can claim hardship to your creditors and keep your IRA account safe. There are exceptions, of course, and other alternatives to explore as well.

For instance, if your IRA is managed by the same bank as your credit card, they will see that you have assets and will be less likely to consider settling your debt for a lesser amount.

The alternative route to hiding your IRA during settlement negotiations is to use that money as part of strategy. In most settlement cases, creditors would rather have some money than no money coupled with collection activity. If you can take a comfortable amount out of your IRA and show it to a creditor, you can offer them the money if they settle the full amount of your debt. This may work for you, but keep in mind that there are various penalties and fees when you take money out of an IRA early.

The credit card settlement process is a complicated process that can wear on you emotionally. It is important to work with qualified companies that are experienced in this field. Companies such as Coastal Credit Solutions include credit counselors on staff to help you find the right financial solution for your situation.

If you do have a substantial savings in your individual retirement account AND have substantial credit card debt that is an unmanageable burden, it is highly recommend that you seek advice from a financial expert like Coastal Credit Solutions.