Cashing in part of an IRA to offer a settlement on second mortgage

[Ann]

Do you think it is possible to cash part of our IRA to make an offer to settle our second mortgage? We owe about $69,000???... we want to file 7 but want this mortgage off our backs and since we really don't have that much in there my husband thinks this is a good idea but is it allowable??? Can anyone advise?

[backtoschool]

Don't touch your ira, its exempt in regards to chapter 7. If you pull money out, that money will not be exempt and your bankruptcy exemptions would have to cover what you pulled out.

So, you would have to have enough exemptions to cover the money you pulled out in order to pull the money out. If you leave the money in the ira, it is exempt and can't be touched.

[LuciluS]

Do you think it is possible to cash part of our IRA to make an offer to settle our second mortgage? We owe about $69,000???... we want to file 7 but want this mortgage off our backs and since we really don't have that much in there my husband thinks this is a good idea but is it allowable??? Can anyone advise?

Please don't do this! You are taking an exempt item and would be converting it into Income which probably will blow your doors off from a Chapter 7 Bankruptcy. Also, unless you are of retirement age, there will be a 10% penalty & lots of income tax owed on that amount of an IRA.

Check out the Foreclosure Section and do a search on 2nd mortgage mod & see if it possible. Or just read a lot of the Threads.

Luci

[eddiep]

You need to check with your lawyer before you make any financial decisions! Expecially something so big.

[Ann]

See... this is why I come here.... you people give me so much good advice and information... information that I have no clue about. Thanks. I guess I will try to modify my second mortgage permanently. That is my only hope of doing a chapter 7 and modification on a second mortgage!

[LuciluS]

See... this is why I come here.... you people give me so much good advice and information... information that I have no clue about. Thanks. I guess I will try to modify my second mortgage permanently. That is my only hope of doing a chapter 7 and modification on a second mortgage!

It is a Wonderful Forum my sweet husband found last October. Yes, check out modification on your 2nd. Google it as there is a forum out there for Loan Mods. All I remember is it had the name safe in it. Let me know if you cannot locate the forum as I will look in the morning..tired now.

Because of the economy, a lot of people cashed in part or all of their IRAs or 401Ks in the 4th quarter of last year. Then got the dreaded 1099 along with either their Accountant or the IRS telling them Hey You! you owe us $$$$ and they had no clue at the time they withdrew the money.

Luci

[liboton21]

What if BK7 was already close? Can you use 401 to pay the 2nd if bank agree to release the lien for the 2nd?

[StartingOver08]

You can use it if you need it since your BK 7 is discharged and closed. But it will naturally affect your retirement income.

The point above is two fold: 401k is exempt and if you convert to cash, the cash may not be exempt (depending upon what you take out and your states exemptions) and two, there are taxes and penalties you need to take into account when you withdraw the funds. Be careful.