If the income from your Ohio employer is not sufficient to cover your mortgage payments, credit card bills, medical bills and living expenses, you may be looking for other ways to increase your available funds. You have been contributing to various retirement accounts for years, and although you would lose some to penalties and taxes, it may seem tempting to withdraw the money to keep you afloat. But is this a good idea?
First, unless the money in your accounts is sufficient to completely eliminate your debts, this will only be a temporary solution. You are likely to find yourself in the same position again soon, but without money to retire on. However, you may be able to eliminate some or all of your debt by filing Chapter 7 bankruptcy, which would then free up your income to pay living expenses rather than debts.
You may worry that you will lose everything, including your retirement accounts, in bankruptcy. According to the Ohio Revised Code, the law lists a number of assets that the bankruptcy trustee may not use to pay your creditors. Among these are your interests to your employer-sponsored retirement accounts, your pension and your IRAs, as well as other types of retirement and investment plans.
Knowing this, you may wonder if you can simply contribute larger amounts to these accounts and avoid losing the assets in the bankruptcy. The law does address contribution restrictions and limits, and these vary depending on the type of plan, as well as other factors. Therefore, this information regarding retirement exemptions should not be interpreted as legal advice.