As a previous post on this blog discussed, Rockland County, New York residents who find themselves in financial difficulties can protect a lot of their retirement savings, at least the savings in qualified accounts like a 401(k) or an IRA, from creditors who may otherwise come after their bank accounts and other valuable assets.
Nevertheless, whether it is out of a sense of moral obligation or because they simply do not know how to handle a financial problem, many New York couples will, before going to see an area bankruptcy attorney, instead refinance their debts by taking out a loan against their retirement plan or, even more drastically, cash out their plans in order to pay down their debts.
While there some situations in which this might make sense, there are many other New Yorkers who, when they realize a bankruptcy could have protected their retirement savings and discharged or re-organized a lot of their debts, will regret the decision to tap in to their retirement.
This is one reason why New York families should remember that, in a financial pinch, it is important not to panic or rush into a solution alone. There are experienced attorneys, like those in our law office, who can help families through difficult situations.
For those who have a moral sense of duty to pay off their debts even if it means first cashing out a retirement plan, it may be helpful to remember that every creditor recognizes that some people, well-meaning though they be, may not be able to pay off all of a debt. They prepare for this possibility. To put it another way, it is one thing to take on a debt with no intention of paying it back; it is quite another to mean to pay a debt but then run into unexpected financial problems.