Have you thought of cashing out your 401k instead of filing bankruptcy? The plan says you can always take a loan, or get the money if it is a hardship. If stopping the bill collectors isn’t a hardship, what is? Need breathing room, don’t you?
Put your foot on the brake!
Your 401k is not an ATM. This is your retirement money. Ever wonder why it is so hard to get the money out? Do you realize that no one can get to that money except you?
In Ohio, retirement funds, including 401k are exempt. That means it is safe from the bill collectors. Even if they sue you, that money is yours alone. Not even a court can order you to take out your retirement money to pay off a lawsuit. The only way those suing you can get it is if you take it out and give it to them, or if you already took out the money and you have it in your bank if they try to garnish your accounts.
What does all this mean to you? It means you can file for Bankruptcy, have your bills erased, and still have your retirement funds safe in your 401k or IRA.
It is always so sad that when people first call me to set up a bankruptcy appointment. The first thing I tell them is not to take anything out of the 401k to pay the bills. They confess they have already done that and it was not enough. There is always a long pause after I tell them that they could have had a bankruptcy discharge and their money as well. Now they are still choking on bills, their take home pay is lower because of a 401k loan, and they are talking to a bankruptcy lawyer anyway.
The next time someone suggests you take from your 401k for your bills, don’t. Someday, when you retire, you will be glad you filed bankruptcy instead.
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