Do not tap that retirement to pay debt… Consider bankruptcy

When…

1. 1. 1. Your mounting bills become too much handle
      2. You do not have sufficient regular income to pay those recurring bills
      3. Your savings account is empty

…it is only natural to consider paying those bills out of funds held in a retirement account – such as a pension, 401(k), 403(b) or IRA.

However, one should rarely consider tapping a retirement account to pay existing bills because all monies in an ERISA-qualified retirement account are exempt from creditor attachment. So, regardless of how much one owes to a creditor, and even if the creditor obtains a monetary judgment, the creditor cannot attach or obtain the judgment debtor’s money in a retirement account. One should never transfer protected money from a retirement account and transfer it into a non-retirement account which causes the funds to lose their protected character.

The better option in those cases? Consider filing bankruptcy; one can file bankruptcy and keep all of the money in an ERISA-qualified retirement no matter how large the retirement account.