Can You Take a Hardship Distribution If You Have An Outstanding Loan?

If someone has an outstanding loan but has now incurred a hardship (notice of eviction), can they take the Hardship Distribution?  I'm probably overthinking this, I just wanted to be sure.

Thanks!

Statutorily, yes, but make sure the plan's provisions allow.

To my knowledge the IRS has never had a restriction on taking a hardship after loan. The IRS used to have a requirement that you had to take all available loans before a hardship but that went away in 2018(?) maybe. It was one of the hardship rewrites.

But as CuseFan notes, the plan can have more restrictive provisions so always good to check.

For a plan participant in dire straits, it was not uncommon for them to take a loan and then a few days later take a hardship withdrawal (plan provisions permitting). This got the participant the maximum dollars out of the plan.

A word of caution, only because I have seen this misunderstanding before (more than once) - just because a person takes a hardship that does not mean they stop making loan payments.