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Author: determinedmom Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308343  
Subject: Re: Bankrupt or try to 'gut it out'? Date: 11/2/2012 6:04 PM
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I wonder if a guy can borrow from his pension - let me guess . . . taxes and penalties in the 25% range?!):

I've never heard of anyone borrowing from a pension and you can't borrow from an IRA. It is sometimes possible to borrow from a 401k up to 50% of your vested balance. The interest rate is low and paid to yourself. However, if you default on the loan it is like taking a distribution of the money. So, you pay regular income tax on it plus a penalty of 10% (federal) and any state penalty if you are under 59 1/2 and don't meet any other exception to allow to withdraw it without penalty (even then must pay the tax).

Since you are a teacher I don't know if you even have a 401(k). Something that varies from plan to plan is that if you leave your employer you may be required to pay the loan immediately (some plans let you continue to pay it out).

That said -- your biggest issue is a spending problem. As many will say you can't borrow your way out of debt. I don't necessarily think 401(k) loans are terrible but the spending problem needs to be fixed first.
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