The most heartbreaking consultations are the ones where a client has cleaned out his or her retirement accounts to try to keep up with credit card payments or pay them down. It is tempting to take money out of your 401K to get rid of your credit card debts, but bankruptcy may be a much better option that “old you” will appreciate!
Credit cards and other unsecured debts can be discharged in a bankruptcy, and if the conditions are right, no payments may be required by the court (i.e., low income and low assets).
Your retirement benefits are protected. Congress and the State of Florida want you to use those funds when you are really going to need them…in the future, not now. We know this because 401K’s, IRA’s, 403b’s, annuities, and pension accounts are exempt. Exempt means these retirement accounts are protected in bankruptcy no matter what the balance. The only exception to this protection is when money is deposited in a larger than normal amount into these accounts to hide/protect money from the bankruptcy trustee or creditors.
Before you consider cashing out your retirement accounts to try to maintain payments on your credit cards or any other combination of debts, see an attorney to evaluate whether bankruptcy would be a good option for either getting rid of or reorganizing your debts. “Old you” will thank you for it!
Contact Miami Bankruptcy Attorneys today to evaluate your unique situation prior to cashing in on your 401k funds.