Cashing Out Your Retirement to Pay Bills? Think Again
When the bills are piling up and creditors are on your case, it's tempting to look at your retirement accounts and consider cashing them out. But if Chapter 13 bankruptcy is on your radar, withdrawing that money could be a big mistake.
The Craig Black Law Firm has seen it happen all too often. We work with clients throughout Georgia, helping hardworking people in Atlanta, Marietta, and throughout the state get a handle on their debt. All too often, we see people cash out their retirement savings only to end up filing for Chapter 13 anyway. Before you spend a dime of your retirement savings, give us a call to discuss your options. You can speak to me personally by calling 678-888-1778, but if you'd prefer, you can fill out my confidential contact form, and I'll be in touch.
Retirement Accounts Count As Income in Chapter 13
When you file for Chapter 13, you agree to repay non-exempt debts as part of a repayment plan. The courts consider both your income and expenses when putting together that repayment plan, and any money you've taken out of retirement in recent months counts as disposable income.
What does that mean for you? It means your monthly payment could be higher than it would have been if you'd left your retirement plan intact. Chances are, you'll no longer have that money when you file, which means you'll have a higher payment without the extra money to tackle it.
Why Cashing Out Retirement Is a Bad Move
Before you take money from your retirement savings, consider the true cost. Clients across Fulton, Cobb, and Rockdale Counties have expressed regret for this move once they learned some of the implications that come with it:
- It increases your monthly payment: Retirement withdrawals count as disposable income, raising the amount you'll be ordered to pay to creditors.
- You may owe more in taxes: In many cases, early withdrawals come with a hefty tax bill and a 10 percent penalty if you're under age 59½.
- You lose long-term growth: Every dollar you withdraw is a dollar that won't earn interest, and that can take a toll on your retirement savings.
On the other hand, if you file for Chapter 13 bankruptcy before you withdraw money from your accounts, those funds will remain safe. Then you can put your efforts into rebuilding your credit. Chapter 13 will also let you halt foreclosures and garnishments, whether you live in Conyers, Sandy Springs, or Marietta.
When You Call, I Pick Up the Phone
When you contact the Craig Black Law Firm, you don't get a staffer or a call center. I personally take the call and answer any questions you have. I've helped working-class residents from Northwest Georgia to Conyers and beyond.
If you're overwhelmed by debt, don't drain your retirement before you work through all your options. Give me a call today at 678-888-1778 or fill out my confidential contact form.