My husband and are in foreclosure and have a variable annuity with Prudential. Is this considered a financial hardship and will I be subject to the 10% early withdrawl penalty?

Please clarify - is this a variable annuity inside an IRA account? No offense, but why in the world would you put a variable annuity (which has its own tax-deferral advantages) into an IRA? Sounds like your Prudential salesman has not given you the best advice.

But back to your question - the 10% early withdrawal penalty on IRA accounts applies except for the following cases:

•You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
•The distributions are not more than the cost of your medical insurance.
•You are disabled.
•You are the beneficiary of a deceased IRA owner.
•You are receiving distributions in the form of an annuity.
•The distributions are not more than your qualified higher education expenses.
•You use the distributions to buy, build, or rebuild a first home.
•The distribution is due to an IRS levy of the qualified plan.
•The distribution is a qualified reservist distribution.

Also, be aware that the annuity investment may itself have a penalty for cashing out early - many (most?) have a requirement that you stay invested for at least 7 years, or else early withdrawal penalties may apply. Agsain, this would be a penalty that Prudential would take out of your investment. Finally, don't forget that you will also have to report the withdrawal on your income taxes.