I am currently working with lukes law office. They are a debt relief company. I have two credit cards that I have in this program. One is sueing me and taking me to court. I have only about a third saved of what I owe them. Can I use my 401k to help pay this?

I have been working with Lukes law offices. They are a debt relief program. I currently have two credit cards involved. One is sueing me and taking me to court. I only have about a third of the money I owe . Can I use my 401k to make up the difference?

First the term "debt relief program" always scares me to death, what type of program are you in, was there upfront costs, and since it appears one is suing you, something is not working?
So more info on that, to be sure there is not some fraud there also

But if you still work for the company, you can, if you meet the program guidelines borrow money from it.

If you are no longer working for that company, you can take the money out, you will have to pay normal taxes and a 10 percent penalty with will all ( taxes and penalty) total to about 40 percent of what you take, so if you take out 10,000 you will owe about 4,000 in taxes and penalties on it

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Originally Posted by mrutledge24

I am currently working with lukes law office. They are a debt relief company. I have two credit cards that I have in this program. One is sueing me and taking me to court. I have only about a third saved of what I owe them. Can I use my 401k to help pay this?

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Wheel and deal with the credit card companies to maybe as much as halve your debts to them. They can be amazingly helpful that way, wanting to get at least some of the money owed to them. Then set up a repayment plan and stick to it. Are you talking with a financial advisor? If not, please do so.

Now that I am an "old person" and retired, it is so nice to have that saved-up money and pension and SS to rely on for buying groceries and cat litter. I advise you to leave your 401(k) alone. You will regret it later if you withdraw it now. And if you are in the U.S. the financial and investing game has been changing so much, so who knows what support you will have in your retirement years if you don't begin to save up now.

Fr_Chuck is correct about the taxes and 10% early withdrawal penalty. In general it is best to consider taking a loan against your 401(k) plan balance than it is to take an outright withdrawal. And be aware that not all 401(k) plans even allow active employees to make withdrawals for the purpose of paying off debt. All plans do provide for withdrawals IF the money is to be used for one of the following purposes:

1.Expenses for medical care previously incurred by the employee, the employee's spouse, or any dependents of the employee or necessary for these persons to obtain medical care;
2.Costs directly related to the purchase of a principal residence for the employee (excluding mortgage payments);
3. Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of postsecondary education for the employee, or the employee's spouse, children, or dependents;
4. Payments necessary to prevent the eviction of the employee from the employee's principal residence or foreclosure on the mortgage on that residence;
5.Funeral expenses; or
6.Certain expenses relating to the repair of damage to the employee's principal residence.

Note that being in debt is not one of the reasons (unless it is leading to eviction). However, some plans are a bit more liberal than this - so ask your 401(k) plan administartor what the rules are for your particular company plan.