Legal Question in Credit and Debt Law in Georgia

Whether money can be withdrawn from a 401K depends on whether the plan language permits such withdrawals or loans. You would not need a lawyer to make such a request. Some plans allow it, Many do not.

Be aware that the tax penalty for some withdrawals is enormous (often 40% or more) so see a CPA before doing this. In other words, it may not be a good idea even if you can.

I am not sure that I understand the question.

If you owe money to the lawyer, the lawyer is not a bank and should not be fronting the costs of litigation for you. Its not illegal and if that is your only source of funds, then it would be a reasonable request for the lawyer to ask for payment of his or her earned fees.

On the other hand, if you are behind on your bills, then you need to consider your situation. You are taking exempt funds (meaning that the creditors usually cannot touch IRAs or pensions if they get a judgment against you) and applying them to your mortgage. If you are falling behind, maybe you need a modification. Or maybe you need to file bankruptcy. Before you take out funds, speak to a housing counselor (you can locate them through www.hud.gov) if you are in financial straits.

However, I have real problems if a lawyer is asking to borrow funds from you to catch up on the lawyer's mortgage and other bills. This is a sign that the lawyer is in trouble and needs help. A lawyer should NEVER take the client's property. If that is what the lawyer is doing, then you need to fire the lawyer.

If you decide to withdraw the funds, what Attorney Ashman says is correct. If you are under 59 1/2 years of age, there is going to be a tax penalty of 10% on early withdrawals. I also do not know if taxes have been paid on the income or not. If not, then it would be a good idea to withhold 20% for the IRS and extra for the state so you do not get hit with a tax bill next year.