Written by Dan Marshall
If a job loss, medical bills or unexpected expenses have got your scrambling to pay your bills, you may have wondered whether it’s a good idea to liquidate your 401(k) account in order to pay them off. Before you take that step, which can subject you to substantial taxes and fees and throw your retirement plans into disarray, you should know that 401(k) accounts are exempt from collections if you file personal bankruptcy.
If you are filing for Chapter 13 bankruptcy and have a second mortgage, you may be able to "strip down" or "cram down" your second mortgage in something commonly referred to as "lien stripping."
As we discussed in our last post, more Americans file for consumer bankruptcy over insurmountable medical bills than any other reason. Of course, many people who can’t afford to pay their medical bills don’t end up filing for bankruptcy, which means there are a lot of people financially suffering over health care debt.