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  1. #1
    Join Date
    Nov 2006

    401K hardship withdraw during Chapter 13

    What is the name of your state (only U.S. law)? Ohio

    I have medical bills that have come up since my filing Chapter 13 last year. Can I hit my 401k with a hardship withdraw to pay them?

  2. #2
    Join Date
    Feb 2005
    Elgin, IL USA
    If the 401(k) is from a current employer I do not believe you can take a distribution, but you may be able to take a loan. Just be aware that if you lose your job or leave your employer any outstanding balance you do not pay back quickly will be considered a distribution.

    If you do take a distribution from the 401(k) of a former employer, it will be taxable. One of the 10% penalty exceptions is "From a qualified retirement plan to the extent you have deductible medical expenses (medical expenses that exceed 7.5% of your adjusted gross income), whether or not you itemize your deductions for the year".

    There do not appear to be any 10% penalty exceptions for hardship in IRS Publication 575, since your 401(k) is protected from creditors.

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