Took out a 401k loan then quit job

Didn’t know whether to flare it as debt or retirement.

So the first six months of 2023 have been incredibly rough. I worked two jobs for the last half of 2022 for about 65-70 hours a week combined, putting pretty much everything I made toward paying down debt so I didn’t save anything. I was still living paycheck to paycheck. After the holiday quarter, hours got cut so drastically at both that I was barely hitting 20 hours combined.

In early March, I got hit with the news that my car needed about $1200 in repairs. I live in an area where I NEED a car and I certainly couldn’t get a different car for cheaper than the repairs would cost. I know just enough about cars to know these repairs were serious and couldn’t wait much longer as it was a hazard to myself and others on the road (both wheel bearings and a disintegrated motor mount). I wasn’t anywhere close to having the money so I took out a 401k loan of $2000 in case it ended up costing more. The repairs actually ended up only costing $1000 so I put the remaining $1000 toward paying off my highest interest credit card as I figured I’d be staying at that job long enough to pay off the loan in time.

Shortly after, I got a letter in the mail saying our complex was not renewing our lease due to my roommate’s difficulty paying rent on time. Not being able to afford housing anymore (as we were still paying the same rent as we did back in 2020) pushed me into a career in trucking so I could live in the truck and pay off my debt. I did some research into 401k loans and everyone said it would just be counted as a withdrawal if it wasn’t paid back. Cool, I’m fine with that.

I come back from a couple weeks of orientation to find a letter in the mail from my previous employer saying that my 401k loan HAS to be repaid by September. Are they just saying that I have to repay it by September for it to not count as a withdrawal? Will letting it go delinquent harm my finances further than just having it count as a withdrawal? Any help is appreciated.

**TL;DR: I took out a 401k loan for car repairs and spent all of it since I figured I’d stay at the job long enough to pay it off. I ended up quitting the job and they said I had to pay it back by September. If I don’t pay it off, is there any penalty besides the tax penalty of it counting as an early withdrawal?**