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Chapter 7 may be better alternative than using IRA to cover debts

It is not uncommon for North Carolina residents to find themselves with financial troubles. Debt issues can impact anyone, and when those outstanding balances become too much to handle, people often find themselves looking for ways to get out from under their burdens. Though Chapter 7 bankruptcy is a viable option for many individuals, some parties may first consider other possible avenues, including taking money from retirement accounts.

Though it may seem like a no-brainer to use already existing funds to cover your debts, dipping into an IRA could have its downsides as well. If a person wants to withdraw money from an IRA, a 10 percent penalty will apply for early withdrawal. Additionally, those funds will also be subjected to taxation.

Because of these added financial implications, individuals who withdraw funds from an IRA would likely need to take out more from the account than needed to simply cover the debts. As a result, parties could lose out on a substantial amount of funds when it comes time to retire. Those considering this option may wish to more closely consider the long-term impacts of dipping into an IRA.

Though substantial debt can feel overwhelming and making payments as quickly as possible no matter the means may seem favorable, other options may be able to help. Chapter 7 bankruptcy could assist qualifying North Carolina residents address their debts while also protecting their retirement funds. Interested individuals may wish to find out more information on this debt relief avenue to determine whether its potential benefits may suit their circumstances.

Source: cheatsheet.com, "5 of the Most Foolish Ways to Pay Off Debt", Megan Elliott, Sept. 19, 2017

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