Protecting 401(k) And Retirement Accounts

If you have started getting calls from debt collectors or fallen behind on your mortgage, you may be tempted to dip into your retirement funds in order to pay your debts. Before you do this, you should consider whether filing for bankruptcy is a better option.

I'm Steven Bilsky, a Memphis-based bankruptcy lawyer with more than 39 years of experience guiding clients through the Tennessee bankruptcy process.

The Laws Governing Retirement Savings

If your retirement accounts are qualified plans under Internal Revenue Code (IRC), they are legally protected, and your creditors cannot garnish or levy on them. The most common IRS-recognized retirement accounts include:

  • 401(k) and 403(b) savings plans
  • Individual retirement accounts (IRAs)
  • Roth IRAs

Withdrawing money from these accounts is a bad idea because you lose the saving and their ability to grow in the future, and these funds then lose their protection from attachment by your creditors, and if you have not reached retirement age, you will also incur early withdrawal tax penalties.

Before you consider taking money from a retirement account, you should speak with an experienced bankruptcy attorney as this is an irrevocable decision that cannot be undone. I can help you determine if a bankruptcy would be a more effective solution to your debt problems.

Getting Out Of Debt Through Bankruptcy

Assets in qualified retirement accounts are exempt from liquidation by the bankruptcy court. That means that if you file Chapter 7 or Chapter 13 bankruptcy, your retirement savings will be protected, and you can make a fresh financial start knowing that they will still be there for your retirement.

Contact Me Before You Make A Serious Mistake

In most cases, taking money out of retirement accounts to pay debts is one of the biggest mistakes that debtors make. Contact me to discuss how I can help you obtain meaningful debt relief while protecting your retirement accounts. Call my office at 901-525-6692 or use my online form to make an appointment.

The Law Office of Steven F. Bilsky is a debt relief agency that helps people file for bankruptcy relief under the Bankruptcy Code.