conditions to cash out 401K early

I was just notified that I am getting layed off December first.
Are there any provisions so I could use my 401K money to pay medical bills, and since I would have no income for a while, pay off my mortgage in my house with minimum penalty?
I am trying to find that information to research that subject with no luck so far.

Oreo27,

I am sorry to hear of your pending layoff. You may want to look for a new position or at least some seasonal work. Or do not forget to apply for unemployment compensation.

Once you have separated from your employer, you can transfer your 401k to an IRA.
Select a custodian for your IRA and have this new custodian do a trustee to trustee transfer from your 401k custodian.

With the money in your IRA, and if you are over age 59.5 years, you can take penalty free distributions for any reason. Income taxes would need to be paid.

If you are under age 59.5 years, you can take a distribution free from penalty (taxes will need to be paid) to pay your medical bills that exceed 7.5% of your Adjusted Gross Income. Do not take more than you need for the medical bills. Taking more will incur a 10% penalty on the excess and taxes will need to be paid. See IRS PUB 590, Individual Retirement Arrangements, Page 53 under EXCEPTIONS for a list of penalty free distributions. http://www.irs.gov/pub/irs-pdf/p590.pdf

At this time there is no provision for a penalty free distribution for paying off your mortgage.

Since this is your retirment savings, and you are not retiring, take as little as possible from your 401k/IRA. You will need this money in retirement.

thank you for the quick reply and the link to the IRS publication.
unemployement won't pay for much but there are some opportunities abroad I am looking at.