Before you cash in your retirement plans remember you always have alternative options which should at least be explored.
Unless you are very young, it may be better to file for Chapter 7 bankruptcy than to use your 401k to repay debt. Using your retirement plans may seem like the easy answer but it is not that simple. Not only will the IRS levy a financial penalty in most cases but you will also risk your income in retirement at a time when you are likely to be very vulnerable. Remember you will not be able to work full-time when you are retired as even if you are in full health, you are unlikely to have the energy. You also may not be able to find work. Depending on your qualifications you could face age discrimination which although illegal is a wide-spread problem. Therefore you should protect your retirement savings at all costs unless a bankruptcy attorney acting on your behalf advises you differently.
Instead of cashing in your 401k to repay credit card debt, why not learn how to manage your finances? Drawing up a budget will give you a clear picture of just how bad your financial situation is. You may be pleasantly surprised. It may just take a little bit of organization on your part to clear those debts without risking your future wealth. If you have a good record with your creditors and have up to now made all your payments, they may just negotiate a lower payment or even a payment holiday arrangement for you. Just make sure you don’t sign over any security for credit card debts or personal loans. As soon as you secure your debts on an asset you own you give your creditors more power. If you have a good credit score you could speak to your bank about refinancing your existing high interest credit cards onto a lower interest loan. You may have to take a long-term view on repaying this debt but at least you are preserving some income in retirement by leaving your 401k intact.