IRA Withdrawal Question...

[mknolan]

I took money out of my IRA account to pay my attorney and filing fee...should I not have done that??

[despritfreya]

Don't see it as a problem. I assume you paid the penalty for early withdrawal unless, of course, it was not an early withdrawal.

Des.

[Floridagail]

I did the same thing, I was broke so I took out money, to pay attorney and rent etc. Then when I told the paralegal she said not good idea, as withdrawing from your 401k will turn an exempt asset into income. In Florida, I only got 3000 exemption. I had 4000 in the bank so I had to spend it down b4 filing. And then It had to count as income. Lucky I was below median income and the trustee looked the other way and did not try to take any of my money in the bank.

[despritfreya]

Certainly, as FG points out, once withdrawn, the funds are no longer exempt. I presume, however, the cash will be gone before filing.

Des.

[btbeme]

Once done it is done. If spent on atty fees or other exemptible items, there isn't a huge problem.

But for future reference - and for people who land here wondering if THEY should do the same - it is usually best to not withdraw from an exempt retirement account. In almost every case your IRA, 401k, etc are exempt and untouchable in a bankruptcy. Part of your new financial life will be retirement planning, and emptying your nest egg is going the wrong direction.