‘I’m an idiot’: I’m middle aged, earn $68,000 a year and have $39,000 in credit-card debt

I’m playing with the thought of taking out some of my past Roth IRA contributions to pay off at least the $16,000 to minimize the impact once the 0% interest rate expires in June. Regardless of how I attack this debt, I plan on keeping the accounts open in order to protect my credit, but I will cut and toss all the cards so I can’t use them.

Looking for Advice

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Dear Looking,

Your credit-card interest rate is robbing you of your future, but if you take money from your Roth IRA, you will be doing the same thing. 

You’re not an idiot. You’re a person who made a mistake by relying on credit. The first thing you need to do is make sure you don’t add to the problem. When was the last time you made a credit-card purchase? Putting $39,000 on credit cards is not fiscally responsible behavior — unless you’re a multimillionaire and you pay off your credit-card bills every month.

So I strongly recommend you cut those cards up to prevent you from being tempted to pick them up again. If you misused alcohol, I would tell you to remove all alcohol from your house. For context: The average credit-card balance in the U.S., according to Experian EXPGY, is just over $6,700.

You earn a relatively good living, given your cost of living. None of this will be worth it if you don’t ask yourself how and why you put so much on credit cards in the first place.

Go through your income and expenditures and see where you can realistically afford to cut back. That means cutting out leisure activities, including vacations. Your priority is to pay off your debt on a regular basis, automating those payments, with a medium- to long-term goal of getting back on track. The National Foundation for Credit Counseling is a nonprofit organization that can help you put together a budget and a realistic plan to pay off your debt. The American Consumer Credit Counseling is another nonprofit organization that helps people in your situation.

You could also attempt to renegotiate the debt with the credit-card companies. “Call your credit-card company and ask to speak with the debt-settlement, loss-mitigation or hardship department,” Bankrate.com advises. “A general customer-service representative won’t have the authority to approve your request. Once you’re connected with someone who has the ability to negotiate with you, explain your situation and make your offer. Be polite but firm.” 

“Outline your terms,” Bankrate says. “If you’re considering filing bankruptcy or hiring a professional to help you with your debt, let the card issuer know and mention that you’d rather work things out directly. At this point, be prepared for the card issuer to potentially freeze your credit limit or close your account.” 

Beware of for-profit debt-settlement companies, which frequently end up costing you more money for a less-than-satisfactory outcome. Stick with a nonprofit counselling service that may recommend a debt-consolidation approach along with income strategies such as renting out a room in your home or taking on a second job.

Bankruptcy as a last resort

Before you plunder your IRA, seek an opinion from a trusted and experienced bankruptcy lawyer. Chapter 7 bankruptcy does not include a repayment plan, so it may suit someone like you who has kept current on their mortgage payments. Homestead laws vary by state, but if you can prove you can pay your mortgage after filing, you would be able to keep your home, assuming other conditions are met. Roth and traditional IRA balances are exempt from the bankruptcy estate up to $1,711,975 in 2025. Given the size of your Roth IRA, it would be an exempt asset. 

In Chapter 7, the outcome depends on factors including the amount of equity in your home and the available exemption amounts, says Scura, Wigfield, Heyer, Stevens & Cammarota, a law firm with offices in New Jersey.

“Chapter 13 bankruptcy, often referred to as reorganization bankruptcy, provides an opportunity to create a manageable repayment plan over a specified period, typically three to five years,” it says. “Unlike a Chapter 7, this chapter of bankruptcy is particularly advantageous for individuals who want to protect their homes from foreclosure because it offers more options for the homeowner.”

This woman wrote to me about her $8,000 credit-card debt. She said she was raised in poverty and worked at a grocery store, so her annual income was likely far less than what you’re earning now. But with the help of a debt-counselling service, she reduced her debt to $2,000 in a year and raised her credit score by 100 points. She said: “I once felt that I had nothing and that I was nothing, but tonight I’m sitting next to the love of my life, watching TV in our beautiful home, and feeling more hopeful and ready than ever. It hasn’t happened overnight, and I still need to keep working toward the end goal.” Change is possible. 

Debt, unfortunately, often comes with a lot of shame. You shouldn’t have to do this alone. 

Related: ‘I can afford to be generous’: How much should I give my stepdaughter for her wedding gift? I want to be fair.

You can email The Moneyist with any financial and ethical questions at qfottrell@marketwatch.com, and follow Quentin Fottrell on X, the platform formerly known as Twitter.

The Moneyist regrets he cannot reply to questions individually.

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