Divorce settlement awarded me $25,000 from my ex's 401k. The divorce was brutal and I have enormous debt. This money is headed for my 401k but I really need it to pay off debts Must this money go into my 401k or can it be deposited into my bank account? If it does go into my 401k (I'm 38 yrs. Old) and I take what I need to pay debt is there a way to avoid hefty penalties & taxes & what penalties am I facing? I'm really desperate and need some valid advice.
Thank you.

If you have an attorney handling your divorce and he is supervising the transfer of the money from the ex's account into your 401K account, you will have to wait until the money is in your account. Yes, when you take the money out of your account you will be penalized. You shouldn't be asking us about this money, you should be talking to your attorney about diverting this money into your bank account instead of your 401K account. If the Judge has already signed the Order stipulating that the money must be in your 401K account, then you can't just have the money diverted away from this account or you will be in violation of the Court's Orders. Have you talked this over with your attorney?

Thanks for responding, Twinkie. I suppose I should clarify. The settlement was awarded during mediation. I've asked my attorney to have the money directed to my bank account but have been told it can't be done. I was under the impression that there was an alternative however my attorney hasn't been very forthcoming with advice which is what brought me here. I had hoped that someone could provide some insight as to how the process works. I'm not even certain where to go for professional advice. Debt is a difficult reality and I would like to be able to live my life responsibly. During my marriage, my spouse & I decided that my salary would support us and we would save placing the funds in the account that had the higher company participation match. My ex left when I was unemployed and took all the cash. I took a low paying job and used my credit cards to survive until I could find suitable employment. My divorce was finalized 1 year ago and my ex is now just getting around to honoring the agreement. I had intended to pay the debt with the settlement but was told today the money will go into my 401k. Ouch.
I'm at a loss, in more ways than one.