Your Financial Health, Ask Jamie - Part 4

July 06, 2009

Understanding financial planning

In part four of our financial Q and A series, Jamie answers questions about investing with IRA funds, paying medical bills, and re-establishing credit after bankruptcy in the short and long-term.

This month Jamie answers your questions about investments and your IRA account, late payments on medical bills, and re-establishing credit after bankruptcy in the short and long-term.

I am looking to invest in gold or silver. What are the negatives in taking out 20% of my IRA to invest? I am 47 years old

  • Rob, Loves Park, IL

Rob,

Money taken out of an Individual Retirement Account before the age of 59 1/2 is generally considered an early withdrawal, which is subject to a 10% penalty fee, in addition to any applicable taxes you will owe.

The exceptions to the rule are withdrawals for non-reimbursed medical expenses, first-time home purchases, higher education expenses, withdrawals to pay medical insurance premiums, and a few others. Weigh your projected earnings on gold or silver carefully against the fees and taxes you will face in addition to the lost compounding you would receive on the funds had you left them in your IRA. Whatever you do, hope you strike gold!

Can late pays on medical bills affect your credit score?

  • Trey, Snyder, TX

Trey,

Late payments on medical bills will hurt your credit score if your medical provider reports account and payment history to the credit bureaus. Work with your medical provider to establish a payment plan that fits your budget and stick to it. Good luck.

My husband and I had to file bankruptcy Chapter 7 this year. Our bankruptcy was discharged February 2009. What options do we have to reestablish credit, if any?

  • Tracey, Louisville, KY

Tracey,

You can re-establish your credit, but it can take time and hard work. Obtaining a secured credit card is one way to get started. With a secured credit card, you deposit an amount of money with the lending institution and, basically, this is the amount of credit you have available to use.

Be sure your credit card payment history will be reported to the major credit bureau agencies. While the rate may be high if you carry a balance from month to month, you will pay zero interest if you pay the balance in full each month. By using this type of card wisely, you should be able to move to a traditional credit card in 1-2 years.

While your debts that were discharged in your bankruptcy are no longer required to be paid, it will be important that all major credit agencies are reporting these debts as "included in bankruptcy." Obtain a copy of your credit report to ensure all are accurate.

You also may be eligible for an auto loan shortly after bankruptcy as a secured debt. Your interest rate will be higher, but you may be able to refinance or trade-in after a few years and quality for a lower rate. Rebounding from bankruptcy can be hard, but it’s possible. The biggest things to watch out for are the traps that cause many bankruptcies to begin with. Establish and stick to a budget, set up an emergency fund, and plan for your future.

My bankruptcy was discharged over 10 years ago and no longer shows on my credit report. Do I still have to disclose it on applications that ask "have you ever?"

  • Cathy, Knoxville, TN

Cathy,

Technically, the term "ever"” implies that you should respond "yes," otherwise it would read “have you filed bankruptcy in the last 10 years?” Also, please note that when you sign or give your electronic authorization on a credit or job application, you are certifying that you’re being truthful.

My advice is to answer all questions honestly. Trying to skirt these questions may result in the loss of an important loan or new job. Honesty is the best policy!

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