I inquired about a loan of $1000 from my 401k . I was told I needed by employer to sign the loan form to allow automatic deduction from my paycheck. When I went to my employer to have him sign the form he refused stating that if I defaulted he would be liable for some or all of that loan. Is this true, I think he just does not want to have to do the paperwork for the additional deduction. Any help?

No that is not true and no your 401 K provider can not require the automatic deduction either. Your 401 k paperwork will state the only actual requirements. And even state how long after you request the money they have to give you the money.

Plus is is your money anyway, and if you don't pay all they do is show it as a early withdraw from their money.