I know of someone that is trying to pay off personal debt (personal loans for car payment, jet ski, etc) by making a hardship withdraw from her 401k. She is only allowed to do this for medical bills. At least from what I can understand. From what I can tell… As far as I know, hardship is not limited to medical bills. It likely applies to overwhelming debt (which it sounds like this person has). It's a double edge sword here. Yes this person is hurting their retirement account. But they are also getting rid of their current debt. Serious personal debt sounds like a hardship to me.