Legal Question in Bankruptcy in Virginia

IRA and bankruptcy

Your IRA is most likely exempt from creditor process, so you are certainly doing somethingyou don't have to do by cashing it in. It maybe the right thing to do -- you need to weigh the pros and cons and decide in the context ofa plan to get out of all of your debt. Here'swhy: if you do end up having to file for bankruptcy, you want to have as much as possible left afterwards. Certain assets, including IRA's (within limits) are exempt, and you get to keep them rather than turningthem over to the trustee to use to pay your debts. If you use them, you get no benefit for it (you're paying a debt that would be discharged), yet you lose the asset. Sobefore you cash in an exempt asset, be sure that the goal of avoiding bankruptcy is avhievable. Remember, too, that there is a 10% tax penalty, plus state and local incometaxes, on the money you take out. That maybe up to about 50% of the amount withdrawn going to taxes. So be sure you explore all the options. It may help to meet with a bankruptcy lawyer -- we don't all just recommend bankruptcy for everyone. If there is a way that works to avoid it, we will do it.