Posted on: 09th Jan, 2009 07:43 am
My question, I went through a divorce several years ago. My divorce killed me. I turned to 401 loans to help me through. Now, I am burried in them. My loanrepayments are killing me and putting me further behind. I am to the point that I WANT to default on them so that I can get out of this hole I dug. I know it will cost me in penalties, but I need help. Is there any way to default, taking the penalties other than leaving my employer?
Hi inahole,
Yes, you may be able to default on your 401(k) loan while you are employed with the company. But you should remember that there will be tax implications due to this. You will lose the 10% early withdrawal penalty on the loan principal but you will also be required to report the total amount of the loan in your income as well. This will increase your tax burden further.
Thanks
Yes, you may be able to default on your 401(k) loan while you are employed with the company. But you should remember that there will be tax implications due to this. You will lose the 10% early withdrawal penalty on the loan principal but you will also be required to report the total amount of the loan in your income as well. This will increase your tax burden further.
Thanks