Use IRA money to Help With Bankruptcy?

The bottom line is that Jason needs to find a long-term solution and any temporary job, instead of cashing out the IRA.

QUESTION: Jason has filed a chapter 7 bankruptcy and recently lost his job in the technology industry.  He has been approved for unemployment insurance, but that only comes to $1,600 gross each month.  If he has $9,000 in an IRA, is it foolish to use that money as a way to pay the bills? 

ANSWER: Yes.  You will get hit with almost 40% in taxes and penalty fees if you use that money to pay the bills.  You need to go out and get a job at UPS or delivering pizzas to make car and mortgage payments.  The bottom line is that $9,000 doesn’t solve your problems.  You need a long-term solution.  You need to find a job instead of living off your IRA.

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