lovelillies416 Posted November 21, 2005 Share Posted November 21, 2005 I will soon be divorced and I am very confused. During my separation my husband stayed in our home and was ordered to pay the mortgage payments. However he did not. Months went by and now the home is in foreclosure. Meanwhile he filed for bankruptcy without my knowledge, so he has no financial responsibility to any of our joint liablities. We have a joint loan for $10000, for home improvements, no less. I will receive a settlement from my husbands 401k, which my lawyer says to roll it over into my 401k. Do I really need to do this? I cannot pay this 10K loan without it. It would be nice to have this money for later, but not if I am drowing in this debt. I would rather pay some or all of this loan and have somewhat of a fresh start. Is this possible without too much penalty? Or at the rist of sounding greedy? My son and I barely afford groceries as it is. Link to post Share on other sites
Scott S Posted November 22, 2005 Share Posted November 22, 2005 Many 401(k) plans allow employees to make a hardship withdrawal because of immediate and heavy financial needs. However, such hardship distributions are not treated as eligible rollover distributions. Distributions (other than rollovers) taken before age 59½ are subject to a 10% penalty on your Federal tax (in addition to the tax due), along with whatever state tax penalties you may incur. The decision is yours, of course, but this is important information to be aware of. In your case, it may be worthwhile, especially if the interest on the loan is high, or if late fees, collections fees or other charges are high. Just be sure to do all the math first so you know what it really will cost. ____________________________________________ When life hands you lemons, make lemonade. When life hands you limes, make margaritas. Link to post Share on other sites
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