Cashing out Retirement to Pay Debts? - Good Idea?

  By: Ryan Hackett

Bankruptcy is a last resort for most people. As a bankruptcy attorney I have met several debtors who have tried almost everything to pay off their debts before they realize they need help.  One of the most unfortunate circumstances that I come across is people who have cashed-out or borrowed large sums against their retirement accounts in an attempt to pay off their creditors. Many times, they aren’t able to get enough funds to pay off everyone and still end up in bankruptcy. Even if you have enough in your retirement accounts to pay off your creditors, it could be disastrous to cash-out retirement funds to do so.  Nearly all retirement funds are protected from creditors. The most common forms of retirement funds that I see are held in 401(k)’s, IRA’s, PERS and 403(b) accounts.  All of these accounts are safe from creditors if you file bankruptcy. 

Retirement funds are important to have in place. They are designed to do exactly what they say – allow a person to retire and maintain an ability to generate income and live. It is sad when desperate people let a creditor talk them into settling any account by draining their retirement. It is especially sad when Debtors do so and still find themselves in bankruptcy later because it wasn’t enough. I can’t count the number of people I see who have cashed-out retirement accounts in the past 10 years, and still find themselves in bankruptcy.

Given the uncertainty of social security in the future, it is more important than ever to have retirement funds in place. If you are considering your debt relief options, I strongly suggest that you talk to an experienced bankruptcy attorney before you pull any money out of a retirement account to repay your debt.

For more information on Bankruptcy, call me at 503-352-3690 or email me for a free consultation.

Comments

[Debt Settlement Help Florida FL]

A consumer should never tap into a retirement account to pay off debts... First you should contact a bankruptcy attorney. If a consumer has too many assets to file bankruptcy then Debt Settlement may be a good option. But be careful. There are so many companies preying on consumers... This is also true in the debt settlement industry... Consumers should only a hire debt settlement company that charges their fees based on the amount forgiven and only collects these fees at the time of settlement!

[Debt Assistance Program]

Tapping into your retirement to pay off unsecured debt would be a mistake. If you do end up filing for bankruptcy in the future, your retirement account are usually protected. You should seek the assistance of an attorney.