Be careful withdrawing money from a retirement account to pay down debt. You can keep your 401k in bankruptcy.

CNN reports that 401k hardship withdrawals have spiked this year going up 36%. Many people turn to retirement accounts as a source of money to pay towards credit card debt, loans, and other financial problems. You should carefully consider your options before doing this however because there are serious risks of dipping into a 401k account. You may face tax penalties and lost future gains on your investment. More importantly, money in most retirement plans is untouchable by creditors and the funds are exempt from the bankruptcy process.

You should speak with an experienced attorney or financial adviser before taking a hardship withdrawal from a 401k help deal with debt you are struggling to pay. It may be better to consider filing for either Chapter 7 or Chapter 13 bankruptcy relief because you can generally keep all the money in your retirement account. It is painful to see bankruptcy clients who have slowly drained their life savings to pay towards debts when they could have simply filed bankruptcy earlier and kept their retirement accounts intact.