Before considering withdrawing your IRAs or 401(k)’s to pay debt that would otherwise be discharged in bankruptcy, consider the bankruptcy option. Many assets are either entirely or partly exempt from collection. Most tax-deferred retirement type accounts are exempt in their entirety. While using the 401(k) money to pay debt may not be a bad idea for some debtors, it rarely solves all of the debtors’ debt issues, and in some instances it creates new tax debt because of the early withdrawal. In general debtors are best served in consulting with a knowledgeable bankruptcy attorney before making this type of decision.
Similarly, debtors in Ohio are entitled to a homestead exemption in their principal residence in the amount of $132,900.00 (the amount is doubled for joint married debtors as long as the property is owned by both debtors). Therefore, generally it is more advantageous to the debtors to file bankruptcy and exercise their homestead exemption to protect any equity they may have in the home. Many times, debtors who borrow money against the equity in their home end up in bankruptcy but with more debt and less equity.
Asset protection is an integral part of bankruptcy planning. Consulting with an experienced and knowledgeable bankruptcy attorney ensures that you receive the maximum protection under the law.
Serving Southwest Ohio clients in Cincinnati, Mason, Lebanon, West Chester, Montgomery, Hamilton, Middletown, Batavia, Wilmington and surrounding areas.
Warren County • Butler County • Hamilton County • Clermont County • Clinton County
