Wht to do if I received a 401K disbursement but now the investment company is saying I was not eligible and have to pay back the money?

UPDATED: May 29, 2012

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Wht to do if I received a 401K disbursement but now the investment company is saying I was not eligible and have to pay back the money?

The company I work for went to non-profit status so our 401k accounts were closed and we had the choice to open a 403b. This 401k account was my contributions only – no company match. I thought I could access this money and pay the tax penalty but they are now saying because my employment wasn’t terminated I was not eligible. This was never asked before they issued the disbursement check. It seems to me the mistake is on their end in not asking – and not on the forms I filled out – if I had left my employer. I used the money to pay down debt and don’t have it to pay back.

Asked on May 29, 2012 under Bankruptcy Law, Michigan


FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

If the 401k disbursement that you received was in fact made by nistake, but you used the money to pay down debt and do not have it to pay back debt, the best way to resolve the situation is to enter into a monthly written payment plan to pay back what you received in error on terms that you can afford.

Before you do so, I suggest that you consult with an attorney who practices in the area of consumer law to make sure that the money you received was sent to you in error as claimed.

IMPORTANT NOTICE: The Answer(s) provided above are for general information only. The attorney providing the answer was not serving as the attorney for the person submitting the question or in any attorney-client relationship with such person. Laws may vary from state to state, and sometimes change. Tiny variations in the facts, or a fact not set forth in a question, often can change a legal outcome or an attorney's conclusion. Although AttorneyPages.com has verified the attorney was admitted to practice law in at least one jurisdiction, he or she may not be authorized to practice law in the jurisdiction referred to in the question, nor is he or she necessarily experienced in the area of the law involved. Unlike the information in the Answer(s) above, upon which you should NOT rely, for personal advice you can rely upon we suggest you retain an attorney to represent you.

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