My name is Carlos R Santiago 44 yrs old. I have a 401k with Principal Financial group. I would like to use the money I have to clear my credit card dept. This finical group will not let me withdraw any money unless is for a funeral bill, down to purchase a home, repairs to a hone that the insurance will not cover, doctors or hospital bills, tuition, foreclosure or eviction. I would like to pay of my bills and get back on track to rebuild my credit.
I could not think of anything and told them I needed the money for tuition. Well that did not work since they require proof. This company does not offer loans or consider credit card dept as hardship.
I’m lost and very much
Real Estate Attorney
You should not use your 401k to pay credit card debt. You will lose more money than you will gain because of the 10% penalty the govt. charges for early withdrawal.
The response given is not intended to create, nor does it create an ongoing duty to respond to questions. The response does not form an attorney-client relationship, nor is it intended to be anything other than the educated opinion of the author. It should not be relied upon as legal advice. The response given is based upon the limited facts provided by the person asking the question. To the extent additional or different facts exist, the response might possibly change. Attorney is licensed to practice law only in the State of California. Responses are based solely on California law unless stated otherwise.
It is typically good advice to state that you should not withdraw monies to pay down credit card debts, becuase there may be income tax due and a penalty as well, both from the IRS and NYS. If you file for bankruptcy, these types of assets would be likely protected from creditors and you might be able to wipe out the credit card debts. That said, you might ask if you could borrow against the account, as some of them have 5 year repayment plans.
401k money is exempt in bankruptcy. Unless your credit card debt is minimal I wouldn't suggest using 401k money to pay it down as you will eventually need the money for your retirement. A ch 7, all things being equal, will eliminate the CC debt and you can keep your retirement nestegg. See a bk atty for evaluation.
Dear Mr. Santiago, one of the biggest mistakes that some of my clients have made is having used their 401k monies to cover debts of creditors before they come to see me. Your 401 K plan is one of the few assets which is generally exempt from creditors. So, essentially, what you would like to do is make assets (that would normally not be available to your creditors) available, which is not recommended. If you have a significant amount of credit card debt and your income is not above the median income in NY or is above (but you have secured debt, such as a car loan and mortgage to pay), you may qualify for a chapter 7 bankruptcy. Generally, this would enable you to keep your entire 401K plan and discharge all of your credit card debt.
Best of Luck to you,
Barbie Lieber, Esq.
Lieber & Lieber, LLP
60 East 42nd Street, Suite 2102
NY, NY 10165
The foregoing is not intended as nor does it constitute legal advice and no attorney client relationship has been created