Struggling with finances is something that no one wants to go through. But there are many people in New Jersey who are dealing with the challenges of making mortgage payments and paying off medical and credit card bills on an income that simply does not stretch that far.

One thing that people may end up doing is dipping into a retirement fund to make some of these payments. Many people in this situation may also be considering the possibility of filing for bankruptcy. But before either of these things happen, it can be crucial to speak with a bankruptcy attorney in order to avoid making some costly mistakes.

For example, did you know that a 401(k) is protected from creditors? This means that if a person files for bankruptcy, the money in a retirement account will not be used to pay off debt. However, this is only true as long as a person does not take money out of a retirement fund. Once a person takes money out, the funds are no longer protected.

This can be a critical error that people make in an attempt to save their assets. They may think that they can file for bankruptcy and still use funds from a retirement account for monthly expenses, but this can be a significant mistake.

When people are struggling with financial issues, they may not want to talk to anyone about it. They may feel embarrassed or as though they should handle the situation alone. However, one of the most important things a person can do before deciding whether or not to file for bankruptcy is to speak with an attorney to discuss your options.

Source: Fox Business, “Will my 401(k) be Safe if I File for Bankruptcy?” Justin Harelik, June 19, 2013