Your 401k account is still yours and you should roll it into an IRA. If you are planning on taking the cash out, you need to be aware that you can take some out penalty free (but not tax free) for certain things like education and health insurance but otherwise, there will be a10% penalty on top of taxes for early withdrawl.

Contact your advisor.. most plans allow for immediate withdrawal, but it is up to the employer. Some require 1 year break in service, some even 2 years.

So I can use my 401k to pay for my COBRA payments, without getting a penalty?

Not if you are no longer an active employe..medical payments are under Hardship withdrawals, which is only if you still work there. If you are terminated, you must withdraw the money, use it as you wish.. if you use it for a qualified reason, your accountant can adjust the penalty when you dfile your taxes...