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Divorced and Sinking in Debt. – Blair


“Dear Steve,

Divcorced. Paying heavy child support. Behind on auto payments, can’t meet basic living expenses – facing bankruptcy. Tried debt consolidation, but the fees were high and it did not meet my needs.

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I have money in a 401k I need now. How can I cah out totally,as the IRS governs?


Dear Blair,

Generally taking money out of your 401K to use for debt repayment is a huge mistake. And generally it does not solve the underlying issue of insufficient income to meet obligations.

As long as the money remains in your 401k it is protected from your creditors if you have to go bankrupt. Cash it out now and if it does not actually solve your situation, you’ve thrown your retirement plan away.

You’d have to check with your 401K provider on how to “cash out” your 401K and see if there is any way to do that without paying at huge penalty for doing that.


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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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