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Get Some Legal Advice Before Using Retirement Account To Avoid Bankruptcy

It is a fact of life that life itself is unpredictable and full of twists and turns. There are times when these twists and turns delight us, and times when they make us want to crawl under a rock and simply disappear. Finding yourself unemployed or deep in debt is one of those painful spots some people find themselves in. When this happens, some might be tempted to use the funds in their retirement accounts to pay debts and thus avoid becoming bankrupt. However, it is highly advisable to contact a legal professional before this is done, because using the retirement account to avoid bankruptcy is not the ideal solution, as this can incur hefty fines and fees. An experienced and capable attorney could help find other less financially damaging ways to avoid declaring bankruptcy without draining the retirement account.

Do This Before Declaring Bankruptcy

It is not surprising that many people would panic when faced with financial problems. Unfortunately, for many people, this could mean doing something drastic and end up hurting themselves and making exacerbating an already bad situation. Thus, before doing something that might be regrettable later, it is sensible to consult legal help in the form of an experienced bankruptcy. Having a capable lawyer means having a neutral party take stock of the situation without too much emotional roller coaster.

Ensure That A Bankruptcy Case Has Been Filed

Many capable and professional bankruptcy lawyers would suggest if the client truly needs additional funds that could only come from the 401K account, the 401K account should not be emptied this money until the client’s attorney has filed the bankruptcy case and the case has been assigned a case number. The bankruptcy lawyer would insist that this should be accomplished first before any other steps would be taken. Failure to do so would result in the client risking losing protection for the retirement account. This could lead to allowing any bankruptcy trustees to be able to garnish the client’s retirement funds in order to pay creditors. This possible turn of events should be avoided at all costs.

 

Draining Your Retirement Account to Avoid Bankruptcy Has Carries Disadvantages

There are good reasons for avoiding not draining retirement account to use its funds to avoid bankruptcy due to the high taxes and stiff penalties. Moreover, this would mean the retirement account loses it legal protection. As long as funds are kept inside the 401K, funds are safe from creditors, and they cannot take by force to pay for debts. Experienced bankruptcy attorneys would advise finding another account to directly roll the retirement account over because money in retirement account would lose its protection if it makes any stops in personal banking account for some time.

Having A Professional By Your Side

While being in danger or bankruptcy is definitely a painful experience, having an experienced and capable attorney who has guided countless other clients through would not only offer you peace of mind, but also ensure you can settle for the best possible conclusion.

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