Protecting 401(k) And Retirement Accounts

Memphis Attorney for Concerned Borrowers

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 bankruptcy is a better option.

I'm Steven Bilsky, a Memphis-based bankruptcy lawyer with more than 30 years of experience guiding clients through the Tennessee bankruptcy process. To discuss your options with a knowledgeable attorney, contact me today for a free initial consultation.

Understanding the Laws Governing Retirement Savings

If your retirement funds are in accounts that are qualified under Internal Revenue Service (IRS) rules for retirement accounts, 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

If you withdraw money from any of these retirement accounts in order to make debt payments, you will lose retirement savings that would otherwise be protected from creditors, and if you have not reached retirement age, you will also incur early withdrawal tax penalties.

Getting Out of Debt Through Bankruptcy Protection

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.

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.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.