BK or 401K hardship

[loonzilla]

First of all, finding this forum has been a stress reliever!!! BK is becoming an option due to 65K in unsecure CC bills. I'm not in foreclosure, but my house payments keep on getting late due to unablility to pay...(due on 1st, not able to pay till 15th and getting worse). I've realized that this is the start of the downhill slide, for my monthly CC min payments, mortgage, utilities and food are higher than my monthlyincome.
I do have 100K in 401K, but find it difficult to obtain funds unless I qualify for a hardship withdrawal. If I can't get funds from this, bk will probably be my only option. Question is: does anyone have experience grabbing a 401K hardship withdrawal to avoid bk? I understand all the warnings of not delving into the 401K, but I'm only 35 and i want to give my wife and myself a 2nd chance. will legal assistance be able to help me grab funds to avoid bk, or am I out of luck?
Appreciate any assistance...

[SinkingFast]

Unless you qualify for a Hardship withdrawal according to the guidelines,......... Purchase of a home, medical, etc.,.......... You're not gonna be able to withdraw the money that way. There are strict guidelines set up by the Federal Government and the IRS regarding 401K funds.

Personally,.............. Having cashed out a retirement IRA to settle up debt hoping to get thru and not making it,............ I wouldn't do that again. Attny after attny said, "Do you realize how much money I could have saved you if you had come to see me a year ago??!!"

If you are not paying the CC minimums, do you have enough money to live??!! That's really the place you need to start. If the answer is no, you seriously need to look at your house and the expenses associated with it. Your spending habits. Do you have lavish cars with huge car payments that are driving your debt??

My advice,............. Don't cash out your retirement to pay you unsecured debt. You'll need that money on down the road. There may well be no SSI when we get there to supplement your retirement savings. And retirement monies are generally exempt/protected when you file BK.

[loonzilla]

cc min payments total around $1500, house payment is $1700...no car payments and after utilities and groceries, not much left. House payment went up when I refinanced 14 months ago to try and obtain "get by" money and pay off some CC, but a medical issue came up so the extra money dried up. We don't live lavishly (haven't went out for dinner in 6 months) but find ourselves using CC when unexpected costs come up.
We are expected to move within the year due to company relocation, so I was trying to stay away from bk so we'll be able to obtain a house. I was hoping there would be a legal plan to obtain my 401K through hardship withdrawal...some steps a lawyer could assist. Right now, we just want a start fresh, get a financial advisor when we are out of debt and never get in this situation again. Seems like options are slim...
Appreciate the feedback...

[HHM]

Whatever you do, do not cash out your 401K to pay down your debt. (Plus, it sounds like your company is fairly strict with the hardship issue, and I don't think you qualify).

Even though it is a tough pill to swallow, BK is probably the best overall option.

Step 1...you need to figure out how to get back to living within your means. If you did not have the credit card payments, could you do it. If yes, then file BK, if no, you need to figure out how you will do so, then file BK.

Step 2...consult with a couple of bankruptcy attorneys. The main thing to figure out is which chapter of BK you qualify for.

[amino99]

Do not touch your 401K

Take this from someone who tapped their 401K last year to pay off debts in the amount of $130,000 - DO NOT TAP YOUR 401K!

We ended up filing for Chapter 7 this year as we now owe the IRS $40,000+ for tax and penalties from the 401K withdrawal. Yes, we were nearly out of debt for a while but when Uncle Sam came for their money, we were right back in the hole. And the payments they want are huge...they allow you the same amounts as in a Chapter 13 for housing, food, etc., and nothing else. The IRS basically puts you on a budget and says "Live on this and give us the rest." Add to the fact they file a lien on everything with everybody thus you're better off going bankrupt than tapping your retirement. The IRS is not a nice creditor and they have no forgiveness if you miss a payment or are late.

Yes, it was the best of intentions as we didn't think BK was the right thing to do (morally) but now we find ourselves in the midst of it. Had we filed last year, everything would have been over and we would still have our retirement nest egg...now all we've got is a large bill to the IRS and credit that is shot for a while. The road to hell was paved with good intentions.

Repeat: DO NOT TOUCH YOUR 401K!