Should I Quit My Job to Avoid Wage Garnishment?


If you’ve recently discovered that a NJ lender to whom you are indebted plans to garnish your wages in order to recover some of your missed payments, it’s natural to feel scared and overwhelmed. How much of your paycheck can they legally garnish? Will your co-workers find out that your wages are being garnished? The fear of that embarrassment is what prompts some people in this situation to ask themselves if they should simply quit their job to avoid the wage garnishment.

Wage garnishment is a debt collection strategy utilized by some lenders when other debt recovery tactics have failed. If you, as a debtor, have not made good faith efforts to repay the money you owe to a particular lender, the lender can get a court order that will order your employer to pay a percentage of each of your paychecks to the lender.

Will quitting your job help you avoid wage garnishment? Well, yes! Wage garnishment only works if there are “wages” being paid for a lender to intercept. So, does that mean you’ve outsmarted the system?

You cannot outrun a debt by quitting your job. In fact, leaving a steady place of employment simply to dodge a creditor is foolish, as they will find new ways to extract the money from you, and it is impractical to think that you can remain unemployed until the 20 year statute of limitations on your lender’s judgement runs out.

Is there any way to stop a wage garnishment order while keeping my job?

Now you’re talking! Keeping your job is your best bet in this situation, because you do have other options. Need to get rid of a New Jersey debt that you can’t afford to pay? Priority number one is remaining employed. Check.

Next, it’s time to talk about filing for NJ bankruptcy. Maybe you don’t want to file for bankruptcy either; perhaps it feels like ‘giving up.’ You may not want anyone to find out that you filed for bankruptcy just as you were worried about people knowing your wages would be garnished.

GOOD NEWS: Bankruptcy today does not have the stigma it held a generation ago. Times have changed, many people have been through some difficult financial challenges in the past decade, and bankruptcy now looks like a pretty good option for a lot of people.

You’re not alone if you consider filing for bankruptcy. Many people have come to the realization that filing for bankruptcy is the best answer to settling their debts. Many New Jersey bankruptcy attorneys will not charge you a fee to consult with them – call and make an appointment to find out what your options are.

A chapter 7 bankruptcy will wipe your debts clean (with a few exceptions like child support and student loans). You’ll be left owing a significantly less amount of money as soon as your bankruptcy is discharged, giving you more money to pay your bills and live life with. You’ll be able to find your way back to a balanced financial situation and a bright financial future if you decide to file for NJ bankruptcy, and you won’t have to try to out-run your creditors.

Image credit: Christie Parker

How to Achieve Financial Success with a Criminal Record


A staggering 25% of Americans have a mark on their background check that is preventing them from being gainfully employed. In fact, for those with a criminal record, finding any kind of work has become next to impossible.

We’re not talking about murderers or bank robbers, either. Naturally, those more serious offenders are busy spending many years in prison. Meanwhile, one in four Americans is dealing with a criminal record from many years ago – sometimes even decades. These dings on their background checks were often petty crimes that took place when they were young and immature. Many who are affected by their past crime(s) say they haven’t been in trouble with the law since, having learned their lesson and lived a clean and honest life after a run-in with the the police. Regardless, they are still repeatedly turned away from job openings, have lost their homes, and many can’t even rent an apartment.

New Jersey, along with many other states, have recently passed legislation that prohibits employers from asking potential employees up-front about their criminal history. This Ban the Box law is aimed at reducing discrimination against applicants based on the fact that they have a criminal record. Employers are still allowed to inquire about criminal history, but only after the initial application and interview stage has passed. Even with the Ban the Box law in place, many employers will simply drop an applicant the second they find out that they have a criminal record.

What is a person to do if they’re dealing with an event from their past that they can’t seem to get out from under?

If the crime took place a long time ago and the applicant has maintained a clean criminal history since, it might be best for them to be up front about the event with potential employers. This is especially true if the crime was relatively minor, and most importantly, non-violent.

A good example of this is a man who fell behind on child support payments due to a cost of living increase. He was not made aware of the increase and was subsequently arrested. Upon arrival at his front door, the officers attempted to detain him, but the man had no idea what he had done wrong so he resisted. Now he is dealing with a count of Resisting Arrest on his criminal record. Employers who hear the whole story will be more inclined to understand rather than discriminate.

For those who still struggle to get work even when taking the honest approach, try applying at a temporary work agency. It may not be your ideal job, and it may not provide work every day, but it’s a step in the right direction. It’s important to get some work history under your belt after the date of the criminal event so that when you do apply for a steady job, employers can call your reference person (your temp agency coordinator or someone you worked for through the agency) to find out that you’re a hard worker who stays out of trouble these days.

If your financial situation has become dire due to being unable to find work, you might benefit from filing for NJ bankruptcy. This can give you a fresh start by eradicating your debts so that when you do finally land the right job, you’ll already be on the path to financial success.


Image credit: Jobs for Felons

Wage Garnishment: FAQ


What is wage garnishment?

If you owe money to a person or company that you have failed to repay or even begin to repay, the creditor (entity to whom you are indebted) can obtain a court order against you. This court document will order your current employer to take a specific amount of money out of each of your paychecks. This money will go directly to the creditor to whom you owe money.

How much of my paycheck can be garnished?

There are federal laws in place that limit the amount of money that can be garnished from anyone’s paycheck so that the debtor can still manage their monthly expenses. Generally, no more than 25% of your income (after deductions) can be garnished by any combination of creditors who may be seeking money from you.

Can I lose my job because of a wage garnishment?

If you have only one garnishment against your wages, your employer does not have the right to terminate your employment, nor can they punish you or treat you any differently because of a wage garnishment.

Multiple wage garnishments filed against you will give your employer some rights to take action. For example, suppose your employer discovers that you are neck-deep in unpaid debt and your job duties include dealing with company finances. Your severely disordered finances at home send up a red flag, and many times employers do have rights against you when the garnishments keep rolling in.

What can I do to eliminate a wage garnishment?

If you feel that a wage garnishment has been filed against you erroneously, you can protest the garnishment at a court hearing. You may also have rights if you cannot manage your bills with the wage garnishments set as they are.

Additionally, you can immediately eliminate any and all wage garnishments by simply paying off the debts in full. If you are starting a new job and don’t want your new employer to know that you owe money to a creditor, your best bet is to try to work with your debt negotiation lawyer to lower the amount you owe so that you can pay it all off in one fell swoop.

Can I eliminate all wage garnishments?

While you can “cancel out” a wage garnishment for say, credit card debt, defaulted loans or medical debt, some garnishments are harder (and sometimes impossible) to remove. For legal reasons, if you owe child support, your NJ county court will automatically set a wage garnishment action in place once your Final Judgement of Divorce has been entered. This guarantees that your children will always be cared for appropriately with no missed payments.

The same is true if you owe money to the federal or state government in the form of back taxes, or if you have delinquent student loans. In fact, wage garnishments for child support, taxes and student loans can even be initiated without a court order.

If you are facing a wage garnishment in New Jersey that you feel is inaccurate or that is preventing you from meeting your other basic financial obligations, work with your NJ debt relief attorney to either modify the wage garnishment order(s) or eliminate them if they are unlawful.


Image credit: Tax Credits

Is My Workers’ Compensation Settlement Safe from Creditors?


Carrying workers’ compensation insurance is a requirement for employers in every state except Texas. This type of insurance is a safety net, in a way, that protects employers from being sued and potentially having to pay out large sums of money in the event of an accident or injury in the workplace.

If you’ve been injured at work and have received a workers’ compensation settlement, you may potentially still be out of work due to your injury. In many cases, even with a workers’ compensation settlement, workplace injuries lead to financial strife.

Extended time off work in order to heal or to receive surgery obviously means no wages earned during that time. Sure, your workers’ “comp” will definitely help, but it will not replace your entire income. This frequently leads to missed mortgage or other important payments. Ultimately, you may decide to file for bankruptcy in order to get rid of the past due debts that have accrued.

If I file for bankruptcy in NJ, will I be able to keep my workers’ compensation settlement money?

This is a pressing question for anyone in this particular situation. After all, the money you received as a result of your workplace accident may have been the only thing keeping you above water. The answer to the above question is almost an unequivocal “YES.”

When a person files for bankruptcy in any state, there are state “exemptions” – assets that are protected from liquidation or distribution to creditors to pay back some of the debts owed. Other examples of NJ bankruptcy exemptions include social security disability benefits, life insurance benefits (usually), retirement benefits and unemployment compensation.

Also on that list of exemptions in New Jersey is workers’ compensation settlement funds. To be clear, anything listed as exempt cannot be taken from you if you file for bankruptcy.

Although safe from creditors, any monies received as part of your workers’ comp settlement must be carefully kept in a designated account into which you only deposit money paid to you for workers’ compensation.

The reason it is so important to keep your exempt cash assets in their own account is because of a funny word that bankruptcy judges don’t like to see: commingling. Now, even though commingling may give you mental images of a long-past dinner party where you didn’t know anyone, in financial terms (at least in terms of bankruptcy in NJ), it means certain death.

Not yours, mind you, but if you allow your exempt monies to commingle with funds you receive from other sources, you’ll cause your protected settlement money to lose its exemption status, and you’ll have to say goodbye to it. If you want to keep your workers’ comp settlement, take every precaution to ensure that it lives in its own private bank account with absolutely NO funds from any other source.

How will anyone know if I have allowed my funds to commingle?

Granted, it may feel like you can simply tell the bankruptcy trustee that you’ve kept your money separated by source, even if there have been times when it was just easier to allow commingling to occur. Know this: if you fail to keep your workers’ comp funds completely separate, the trustee WILL find out about it. Every deposit made into every account you own will be scrutinized. You will need to keep a detailed paper trail that clearly shows the origin of every single cent kept in all of your bank accounts.

While you do have to be extremely careful in order to protect your exempt assets in bankruptcy, as long as you follow the rules, you’ll be able to keep all of your New Jersey workers’ compensation money.

Image credit: Anthony Easton

Have Your Wages Been Garnished? You Have Options.


Wage garnishment is a legal situation in which your employer is required to withhold a specific amount of money from your paycheck in order to repay one or more of your creditors. In order for most creditors to have a valid wage garnishment order, they must have a judgement from the court stating that you legally owe them money and that your wages may be garnished until such time as the debt is repaid in full.

Naturally, when you borrow money from a creditor, you enter into an agreement that states your intention to repay the money you borrow. Whether you owe money to a creditor, the IRS, a secondary learning institution (student loans), a medical institution or an ex-spouse, it is possible that you will have your wages garnished if you fail to make payments on your debt.

It is understandable that debtors should be held responsible for their financial obligations. However, you still have to be able to survive while you are repaying your creditors. If you currently have wage garnishment(s) against you, there are some specific federal and state regulations that you should become familiar with.

  • Not all debts are created equal. Some types of debts do not require that a creditor receive a court order for a wage garnishment to commence. If you’ve received a child support order since 1988, it also contained an automatic wage garnishment order. No additional court order is required. The same goes for any unpaid income taxes and student loans that you’ve fallen behind on. Credit card debt and medical bills are debts that require the creditor to sue you and obtain a judgment and order from the court before your wages can be garnished.
  • Wage garnishments have limits. Federal laws state that your creditor(s) can take 25% of your disposable earnings OR your disposable earnings less 30 times the current federal minimum wage, whichever is less. New Jersey wage garnishment laws further limit how much your creditors can garnish. Under NJ wage garnishment rules: creditor(s) can garnish up to 10% of your wages if you make less than 250% of the U.S. poverty level. If your income is more than 250% of the poverty level, creditor(s) can garnish up to 25% of your wages.
  • You cannot be fired due to a wage garnishment order in New Jersey. Some employers may not like dealing with a wage garnishment order, which may tempt them to fire you so they don’t have to comply. In New Jersey, this is illegal. All employers must comply with wage garnishment orders.
  • Wage garnishments can be negotiated. If you’ve received a wage garnishment order from one or more of your creditors, you may very well be quite upset and anxious about losing a significant portion of every paycheck. A NJ wage garnishment order that will impede your ability to pay all of your monthly expenses can be appealed. Veitengruber Law will sit down with you to go over your living expenses and the garnishment that has been ordered. We will then formally object to the order and request that the court lower the amount of the garnishment.
  • Bankruptcy will halt a wage garnishment order. If you’re in extreme dire straits, you should consider filing for bankruptcy. Firstly, as soon as you file for bankruptcy, something called an automatic stay goes into effect, which prevents any of your creditors from collecting any money from you. (Exempt from this, of course, are alimony and child support.) Secondly, if satisfying a wage garnishment is well beyond your means – you probably should have filed for bankruptcy awhile ago.

To learn more about how we can help you with your wage garnishment dilemma, call Veitengruber Law at (732) 852-7295. We offer free first-time consultations, and payment plans that are extremely reasonable.

Will a Gainful Job Offer Affect My Bankruptcy Case?


So, you’ve found yourself way over your head in debt. You’re certainly not alone. If the fact that you aren’t alone in your financial distress doesn’t buoy your spirits, try this: Help is available.

Maybe you’re just able to keep paying your rent, utilities and living expenses. Anything above and beyond those payments has likely been put off repeatedly, like student loan debt, quickly compounding credit card bills, personal loans and medical bills.

It may appear to the untrained eye that you are doing ‘ok’ since you are able to remain in your home, pay your utility bills, and put food on your table. However, only you know exactly just how ‘not ok‘ your financial situation is, and with every credit card bill that you toss (unpaid) into the trash, your stress level is bound to increase. Your mental and physical health have undoubtedly begun to suffer due to a nearly constant feeling of worry.

Some people are in this or a very similar situation due to a lack of information about debt resolution. Oftentimes, we talk to people who (falsely) believe that filing for bankruptcy is only an option if you’re chronically unemployed and have essentially already lost everything, including your home. We are happy to rectify this misinformation!

If your income allows you to pay rent (or your mortgage) and feed your family but you have thousands of dollars of unpaid debt, you have a very solvable problem. Bankruptcy law focuses on helping struggling debtors just like you repay money and/or wipe out debts in order to get them back on track.

Don’t assume that you wouldn’t qualify for bankruptcy just because you have maintained a place to live and haven’t had your electricity shut off. If you have significant debts that you are simply unable to even make a dent in, bankruptcy is very likely a good option for you.

What if my job situation may improve in the near future?

First of all, congratulations on your perseverance! Secondly, a Chapter 7 bankruptcy would focus on your financial situation at the time of filing. If you successfully file for bankruptcy and subsequently obtain better employment or receive a raise, you don’t have to worry about losing any of that money to your bankruptcy trustee.

With that being said, there are strict laws in place that help prevent bankruptcy fraud. For example, you cannot legally accept a large sum of money (for example an inheritance) within a year after filing for bankruptcy. Debtors are also prohibited from repaying only  selective lenders prior to filing for either a Chapter 7 or Chapter 13 bankruptcy. This ensures that all of your creditors are paid back equally with none of them receiving preferential treatment.

However, as long as you are acting in good faith, you have the right to accept a better job or even a pretty significant raise after your bankruptcy has been filed. After all, the primary goal of bankruptcy laws is to eradicate your debts and see you on your way to a brighter financial future.


Image credit: S. Mann

Can Bankruptcy Get Me Out of Credit Card Debt?

scrabble cc debt

Annie had always been diligent about staying current on her mortgage payment and utility bills – it was important to her to be able to remain in her home and she was proud of paying her bills.

About 18 months ago, Annie incurred a demotion at her place of work, and started bringing in only about half of her former paycheck. Over that period of time, she prioritized her monthly payments and continued to stay current on her home loan and utility bills.

However, the cost of those bills quickly ate away at her new (much smaller) paycheck, and Annie found herself charging many of her living expenses to one of several credit cards. All the while, as she continued to use her credit cards for things like groceries, toiletries, gifts and miscellaneous expenses, she had only planned for this situation to be TEMPORARY.

Ever since her change in job status, Annie had been tirelessly applying for positions that would see her making the money she needed to finally pay down her credit card balances and start using real money for her expenses once again. Unfortunately, due to a challenging job market and her lack of a college degree, she was passed over for all of the higher paying jobs she applied for, and her credit card use continued.

She had been unable to pay her monthly credit card minimums for awhile, and tried to put the rising balances out of her mind until she reached a place in her life where she could adequately deal with them. Still stuck in the same lower paying job a year and a half later, she finally decided it was time to sit down and add up all of her credit card debt so she at least knew what she was dealing with. Imagine her surprise when the total amount was a staggering $25,000+. What she wanted to know now, was:

How can I get rid of this debt and still manage to live my life?

Many people don’t fully understand bankruptcy. It is still taboo in many areas of the country and among certain groups of people. In fact, some people like Annie don’t even realize that credit card debt can be erased by filing for Chapter 7 bankruptcy. Not just lowered, but ERASED! (It is possible to repay your credit card debt on a modified schedule with a Chapter 13 bankruptcy – but this requires that your income will allow you to do so.)

If you’ve found yourself in a credit card situation that you never thought you’d be in, do not be ashamed. It happens to A LOT of people! You did what you had to do to make it through a tough situation. Perhaps you made some less-than-optimal money decisions. The important thing is that you now recognize that there is a problem and that you are taking steps to rectify it. Contacting an attorney should be the next thing on your To-Do list, so that s/he can discuss your case specifics with you, and create a plan of attack that will see you with the brightest financial future possible.


Image credit: GotCredit via Flickr

Friday Five: Personal Finance Books Worth Reading


If you’ve ever strolled down the ‘Self-Help’ section of any bookstore, or scrolled through an Amazon book search, you were probably overwhelmed by all of the titles just begging to be read. Here, we’ve hand-picked 5 critically acclaimed works that will help you take the steps necessary to get your financial life in order.

  1.  Small Move, Big Change: Using Micro-Resolutions to Transform Your Life Permanently; Caroline Arnold
    This book assists you in taking long-reaching goals and turning them into small, manageable changes that can ultimately lead to a huge shift in your life, both in the present and in the future. By using “micro-resolutions,” you reward yourself instantly, which creates new habits that will ultimately change how you think and act regarding money, food, productivity and organization.
  2. The Total Money Makeover: Classic Edition; Dave Ramsey
    “Dave Ramsey is America’s trusted voice on money and business.”¹ The Total Money Makeover helps you create a plan to get out of debt in 7 easy steps. It also teaches you how to build up that nest egg you’ve been wishing you had. The success stories (included in this book) alone ensure that this read will really grab your attention, regardless of your age, job status, or income level.
  3. Rich Dad Poor Dad: What the Rich Teach Their Kids About Money that the Poor and Middle Class Do Not!; Richard Kiyosaki
    This book held a top spot on the New York Times bestseller list for more than 6 years. Kiyosaki grew up with a very educated, yet financially unstable father. Conversely, the father of his best friend dropped out of school in 8th grade only to become a multimillionaire. Throughout his childhood and young adulthood, Kiyosaki learned that “the poor and middle class work for money,” but “the rich have money work for them.” He internalized this message and was retired by the age of 47. In Rich Dad Poor Dad, he teaches you a type of financial literacy that goes against conventional wisdom.
  4. Get Rich Carefully; Jim Cramer
    There are no get-rich-quick schemes that actually work, and Jim Cramer knows it. In Get Rich Carefully, you’ll learn how to plan for long-lasting wealth using a low risk plan. The “personal finance book of 2013,” is a very readable guide that will show you how to turn your savings into long-lasting wealth.
  5. Your Money or Your Life: Nine Steps to Transforming Your Relationship with Money and Achieving Financial Independence (Revised Edition); Vicki Robin & Joe Dominguez
    This international bestseller was originally written in 1992 and has been printed in 11 languages. It has been dubbed “the seminal guide to the new morality of personal money management” by the Los Angeles Times. Now, it’s been updated for the new millennium and our wavering economy. You’ll learn how to: get yourself out of debt and start saving, live better for less money, deal with any inner struggles regarding your values and lifestyle, live green while spending less, and ultimately take charge of your money. You’ll start living rather than just “making a living.”

When deciding which book(s) to use as financial guides, it’s important to remember that just about anybody can write a book these days. We’ve recommended the above 5 to you because they’ve been proven successful, and are written by actual finance/money experts. If you have a book you’d like to recommend to our readers and clients, please leave a comment. We’d love to hear from you!

Image credit: R Cocks

¹Editorial Review;

How Will a Foreclosure Affect My Life?



What is Foreclosure?

A foreclosure can happen to a borrower if they are unable to stay on top of their mortgage payments. During a foreclosure, the bank or lender will attempt to gain possession of the home or mortgaged property.  They will then put the property up for sale in order to recover the unpaid balance.

If you have been having trouble paying your mortgage and have fallen behind by several months, you may be in danger of having your lender foreclose upon you. Some people are okay with letting their home go into foreclosure as a way to rid themselves of that particular debt so they can move forward and gain financial stability. By forfeiting their rights as a homeowner, they will then (hopefully) be able to move to more affordable housing, making their monthly payments more reasonable.

What Can Foreclosure do to My Life?

Before letting your house go into foreclosure, it is important to recognize the effects of doing so. It may seem like an easy way out of a mortgage you can no longer afford, but there are some repercussions that may make you want to think twice.

Primarily, a foreclosure on your financial record significantly drops your credit score immediately. In fact, it is possible for your credit score to decrease by up to 300 points! As you know, your credit report and credit score can affect many different aspects of your life, so suddenly a foreclosure has turned into a much more complicated and detrimental situation.

Along with your lowered credit score number comes difficulty securing a rental home because many landlords are now being much more strict about who they rent to. You may also be denied for things like: car loans, insurance (life, rental, car), and even credit cards. More and more employers are now doing credit checks along with background checks, especially if the job in question is in the financial field or has you dealing with money in any capacity. Your existing credit cards and other loans may suddenly bump up your interest rates when they find out about your foreclosure and lowered credit score, because you will be considered more of a “high risk” borrower.

Military personnel and employees may lose their security clearance if there is a foreclosure and other patterns of financial distress noted on their credit report, such as filing for bankruptcy or simply ignoring bills.

Even with all of this information, allowing a property to go into foreclosure can be the best decision for some people. If you have educated yourself regarding the seriousness of a foreclosure and still feel strongly about moving forward with it, just stay as informed as possible throughout the entire process.

What Can I do to Stop the Foreclosure Process?

If the information contained in this article has made you think twice about the far-reaching and long-lasting (up to seven years) effects of foreclosure, you need a good foreclosure defense attorney to help save your home.

An experienced New Jersey foreclosure defense attorney will fight for you during the foreclosure process using legal strategies that will slow down or stop your foreclosure altogether.

The reason why foreclosure defense can be very successful is because most lenders really do not want to take your home away from you. It would be much more beneficial to them if you were to continue paying your mortgage. Although they would very much like to receive your full mortgage amount each month, many lenders/banks are willing to negotiate how much you pay them, while allowing you to KEEP YOUR HOME.

Entering into negotiations with your lender/bank by yourself is not advised. By working closely with your New Jersey foreclosure defense lawyer, you will have someone (with experience on his side) to negotiate for you.

If you are about to lose your home to foreclosure or are already in the middle of a foreclosure process, but don’t want to lose your home, don’t waste another minute. Call our office today and set up your free appointment with George Veitengruber, Esq. He has saved homes from foreclosure for a multitude of clients. Why not let yours be his next success?

Image credit: Lending Memo

I Want to Cash Out My 401(k) – What Do I Need to Know?

5792635506_697faa416d_zImage credit: Miran Dalone

Cashing in your 401(k) is something that has crossed the minds of many Americans today in order to make ends meet, whether in response to an emergency, to put a child through school, or to help a friend or loved one. It certainly can be quite tempting to cash out your 401(k) retirement plan when it seems as if that money is simply sitting there and taking up space when it could be put to good use.

Before you make any decisions regarding cashing out, be aware that there will be consequences of this choice. Should you cash out your total 401(k) amount, you will immediately owe income tax on the entire chunk of change.

If you are under the age of 59 1/2 years old, you will also be charged a 10% early withdrawal penalty fee on top of paying taxes on the amount you cash out. That can put a pretty significant dent in your “take-home” amount.

Your 401(k) and other similar contribution accounts are funded with money from your paycheck before taxes. This is beneficial for you because, by taking money from your paycheck and putting it into your retirement fund, the amount of income you are taxed on lowers, bringing down your income tax bill. Naturally, you will have to pay taxes on your 401(k) money when it is withdrawn later in life, but you will not be penalized the extra 10% if you wait until you are age 59 1/2 or older to tap into those resources.

Another reason to resist cashing out your 401(k) early, is that, in some cases, you may be getting a matching contribution from your boss. These can range from fifty cents to a dollar for each dollar contributed by you. By cashing out early, you are essentially giving up this free money! Additionally, matching contributions aren’t taxed until retirement – which means your tax bill will remain the same while you are essentially making more money.

One exception is something called a Roth 401(k). This version of your retirement savings plan works in reverse to the traditional 401(k). To clarify, you will pay taxes on money as you contribute to this type of plan, so you won’t see an immediate tax break. However, you won’t be paying any taxes upon withdrawing money from a Roth 401(k) in retirement. This means that any money contributed to this account is free to compound – tax-free – without limit.

Let’s say you are considering cashing out your 401(k) to help a friend or loved one in need. In other words, you will essentially be gifting the money you take out. Unfortunately, simply because you are choosing to be generous with your savings does not afford you a tax break, and you will still be charged the full income tax amount on your 401(k) total. Luckily, you probably won’t have to pay gift tax – unless your account contains upwards of $5 million, which is the limit for tax free gifts throughout your lifetime.

Also keep in mind that if you withdraw $14,000 or less and gift that amount, you do not have to report it to the IRS. If you withdraw more than $14,000 as a gift, you will have to fill out form 709 “United States Gift Tax Return.”

The bottom line about cashing out your 401(k) for things other than retirement is this: Do your research. Make sure that you’re making the wisest decision possible given your current circumstances. If you need help determining whether or not you should raid your retirement account, contact an attorney with experience in the area(s) of Estate Planning and/or Bankruptcy.