I have been unemployed for 11 months. The work picture looks good in near future. Under IRS Code 1.40(k)-1(d)(3)(iii)(b)can I withdrawl a portion of my 401(k)money to pay for a lawyer to help with a restructure of my property loan. I fit all the criteria of restructering but lender is somewhat dificult in understanding the HAMP home affordable mortgage program as am I. the lawyer cost is 3x 1500.00 = 4500.00 . First 1500.00 has to be paid in two weeks the other two payments one a month. Can I use this reason as a hardship? The definition of hardship states payments necessary to prevent foreclosure.

You probably would be able to withdraw the money, however, you would still have to pay the taxes and penalties.

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Originally Posted by eric33

Under IRS code can I use my 401 (k) hardship to pay lawyer fees to keep my home ?

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Hello eric:

If I said no, would you just sit back WITH your 401(k) in tact and lose your home?? I certainly hope you WOULDN'T do that.

IF you have to battle with the IRS over it, at LEAST you can battle from the comfort of your own living room. If you lose, you'll STILL have your living room.

excon

I think your use of the 401(k) money DOES qualify as a hardship - which means your employer must allow you to take a withdrawal. Your employer may have some rules about how to actually do this - for example they may require that the funds be paid directly to the lawyer, not to you. Also, even though the withdrawal is a hardship, as ScottG says you will still be with the 10% early withdrawal penalty as well as taxes.