I'm hoping someone here has an answer to my question.
This year I took out a $20,000 401k loan (NOT taken as a hardship withdrawal) and I am making a payment out of every paycheck. I have spent over $40,000 in uncovered medical expenses this year. It is possible that I might be loosing my job soon. I have found bits and pieces of info online pertaining to this but nothing really clear.
My question is this:
If I default on my loan (stop making payments) will the 10% penalty be waived due to the fact that I have spent over 7.5% of my income in medical expenses in the same year as I took out the loan? I know I will have to pay income tax on the money I just don't want to pay the penalty also.
Just wondering if anyone else has had to deal with this.
Thanks
