Personal Bankruptcy and your 401K.
Ive blogged about this before but I want to re-iterate that if you’re in deep credit card debt and don’t see a way out…DO NOT take out your 401k to pay that credit card debt. It doesn’t make any sense whatsoever. You’ve been saving that money for retirement, and there are incredibly serious tax consequences to taking that money out of the account. Furthermore, on a practical level, it may not even make a dent in your debt. Lets say your a typical client and your credit card debt is somewhere around $50,000.00 and you have about $25,000 in your 401k. If you take out that money to pay your credit card bills (most of those payments going towards interest and fees), you won’t pay off your credit card debt, you’ll have decreased or even eliminated all of your retirement savings, AND you’ll have to pay Uncle Sam for the privilege. Bankruptcy can help you eliminate all of your credit card debt and your 401k is exempt in almost all cases. That means you get to keep the money you worked so hard for and still be able to eliminate your credit card debt. Don’t take out that money until you speak to a Bankruptcy attorney.