Bankruptcy is not just about discharging debts and saving your salary from wage garnishment , it is about protecting your future. One of the ways that bankruptcy protects your future is by protecting qualified retirement account from creditor seizure.
Below are a few ways that you can protect your retirement as you consider filing bankruptcy:
- The first thing the debtor should do is avoid using their retirement account as collateral for a loan. We repeat, do not use your retirement account as collateral for a loan. If you use your retirement account as collateral for a loan, filing bankruptcy may have limited affect in protecting your retirement account. Speak with a bankruptcy attorney to find out what you can do if you have already made this mistake.
- Do not withdraw money from your retirement account to pay for debts or living expenses. If you find yourself withdrawing money from your retirement account in times of financial duress then you really may need to speak with a bankruptcy attorney. Borrowing from the future is a huge mistake and bankruptcy will not be able to protect the retirement money you have already withdrawn. Bankruptcy has the power to protect money in your retirement account; but only if you have not withdrawn it.
- Do not take out a loan against your retirement account to pay your debts. This is very tempting for debtors trying to avoid bankruptcy; but as we have said, if you are borrowing from the future to pay for today, it is a sign that you're in deep trouble. At the very least talk to a bankruptcy attorney about how bankruptcy could help you protect your retirement before you take out a retirement account loan.