When a New Jersey resident cannot repay a credit card debt, could a creditor garnish funds from that person’s Individual Retirement Account? The answer to that question depends on whether or not the individual in question is actively withdrawing the funds. If funds from an IRA have been withdrawn and placed into the owner’s savings or checking account, the money could be garnished if the creditor wins a judgement to seize a bank account. However, funds in IRAs and other retirement accounts are generally beyond the reach of creditors.
When a creditor attempts to seize money in a bank account, it can only take what is available in the account at that time. For example, if there were $1,000 in the account, a creditor would only be able to take that $1,000. In the event that the balance in a bank account is less than the amount owed, a creditor may get additional judgments until the debt is paid off.
To lower the odds of having money in any type of account seized, it may be a good idea to contact a creditor as soon as possible. Creditors are sometimes willing to work out a payment plan because compromising on an outstanding balance is often less expensive than taking legal action against a debtor.
Paying off a credit card debt can be difficult for those who have limited savings or are on a fixed income. Someone who is in need of debt relief may wish to hire legal counsel to help find ways to either negotiate a lower payment or have the debt forgiven or otherwise discharged. Hiring an attorney may also force creditors to stop contacting the debtor and instead contact the attorney about the debt in question.
Source: Fox Business, “Can Credit Card Company Garnish IRA?“, Jeanine Skowronski, July 10, 2014