If you are struggling to pay your
bills, taking a loan against your 401k or taking any money out of a retirement
accounts is not a good idea for two main reasons.

The first reason is practical – if
you take money out of your 401k now, you will see tax penalties later if you
have not reached the necessary age. Because most people don’t set aside the
money to pay the taxes on the 401k withdrawal, you could see a pretty big
problem come tax time when you have to pay the tax penalty.  

The second reason taking a loan
against your 401k is a bad idea is because under the bankruptcy code, your 401k
or IRA is 100% protected from creditors. That means that a creditor, even if
they get a judgment against you, could never touch that money. Think of that
money as locked away in a secret vault that only you have access to. But when
you take that money out of your 401k, that money is no longer in the secret
vault and now creditors can access it. If a creditor has tried to garnish your
bank account, by taking a loan against your 401k and placing that money in your
bank account, you could just be handing over that money straight to the

If you are struggling to pay your
bills, reach out to an experienced bankruptcy attorney
for a consultation. There may be options for you to reduce your debt and keep your
retirement money safe.

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