Can 401K funds be taken by creditors?

I live in Mississippi and have incurred medical bills way in excess of my ability to pay. Although I have worked out a satisfactory payment schedule with several of my creditors, several have refused and have turned me over to collection agencies. Given the amount of debt and my relatively low income, it's likely that one or more of these will wind up in court. If that happens, will they be able to take funds from my 401K account. Or stated another way, can I be ordered by the court to withdraw these funds to pay toward these debts, thereby incurring the "early" withdrawal penalty.

[I AM ALWAYS LIABLE]

Originally posted by feichman
I live in Mississippi and have incurred medical bills way in excess of my ability to pay. Although I have worked out a satisfactory payment schedule with several of my creditors, several have refused and have turned me over to collection agencies. Given the amount of debt and my relatively low income, it's likely that one or more of these will wind up in court. If that happens, will they be able to take funds from my 401K account. Or stated another way, can I be ordered by the court to withdraw these funds to pay toward these debts, thereby incurring the "early" withdrawal penalty.

My response:

You're going to be okay - - at least insofar as your retirement plan is concerned. A 401K Plan is exempt from execution if it is set up primarily for retirement purposes and not simply to shield assets from creditors. The fact that a Plan is administered by the your employer, that you have no control over the administration of the Plan or its assets, and that the contributions to the Plan are no more than permitted by the Plan, justifies a finding that a 401K Plan is exempt from execution.

IAAL