No. of Recommendations: 1
Hi. I'm new to forums so forgive me if I go about this wrong. I'm just gonna lay it all out here, so I apologize for lengthiness. I recently posted a question on a couple other boards about a Roth IRA that I acquired as part of a divorce. It's worth $30K but I'm more than $17K in debt. From what I can tell, I should be able to withdraw $16K of the IRA tax- and penalty-free, which I'd like to do to pay off my debts. However, the folks on the tax strategy board think this is maybe not such a good idea. Then again, they didn't have all the details. So I'd like to get some input from the consumer debt experts over here before I do anything rash...

Here's all the gory financial details:
I'm unemployed. I stopped working to take care of children 9 years ago, and though my divorce process started more than 2 yrs ago, I haven't been able to find another job. I live in a remote, rural, economically depressed town with high unemployment. In other words, I don't know how long I'll remain unemployed. My only income is from child and spousal support and my ex is about to attempt to reduce it, so it's rather unstable.

Income= $1200/month

Debts:
Target Redcard: $254 @ 22.9%
Chase Amazon: $325 @ 20.2%
Discover: $5314 @ 16.5%
Chase: $3536 @ 13.2
0% promotional cards: $7700 - the promotions will expire in July and have terrible rates afterwards

Expenses:
rent: $550
utilities, internet, car insurance: $290ish
credit card payments: whatever is left over

Other:
food: I'm on food stamps. No haters, please. And apparently you can have an IRA and still have food stamps. But it seems silly.

Yep. I do still use my credit cards. I did not get the house in the divorce and had to pretty much had to start over from scratch with furniture and such. Still making do without some stuff. Anyhow, my dilemma was/is that if I bought/buy what I need with cash, then I won't have enough money left over to make the minimum payments on the credit cards. So I keep charging things, but I've never missed a payment and usually manage to pay more than minimum on at least one card (usually go for the highest interest one). Maybe I should have declared bankruptcy but I just really didn't (and don't) want to do that. Also, I feel like if I have no access to credit, I will be screwed in an emergency like major car repair. My FICO score right now is 680.

The bulk of my debt came from the fact that I had to pay my divorce lawyer with credit cards. And even though the ex eventually had to pay some of his fees, that was after I'd been paying interest for a year and a half. So...I feel like even though I still use the cards, if I paid off this debt with IRA money, I wouldn't get so deep in the hole again because I'm not going to get divorced (or married) again. Then again, because there is custody involved, there will always be a threat (literally) of further lawsuits (til the kids are 18 anyway), as there likely soon will be regarding support amounts.

I admit I do not have a detailed budget at the moment. I guess I was just sort of living in limbo waiting for this IRA to come through, thinking I'd budget afterwards. (It had always been my intent to use money from the IRA to pay off the lawyer/credit debt, regardless of whether there would be taxes on it. I didn't think I had much choice in that regard. And then it took a LOT longer than I thought to actually *get* the IRA transferred.)

So...my income is pretty much equal to my debt at the moment, which means credit card companies aren't too keen on giving me new promotional rates. And just paying what's leftover after rent and utilities, I'm not really getting anywhere. I don't feel like I'm spending *much* on non-essentials, but I admit that I'm definitely spending *some* on them.

To me, it seems like a pretty good idea to take this (hopefully) tax- and penalty-free money and use it immediately. It still seems to me that even if I *did* have to pay taxes and penalties, it would be better than endless credit card interest.

What say you, wise people?
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