IRA Garnishment

Judgment creditors may garnish your IRA funds to repay an outstanding obligation.

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Garnishment is a legal procedure by which a debtor's assets are seized to satisfy an obligation. Individual retirement arrangements are tax-deferred savings accounts that can be garnished by judgment creditors to satisfy legal claims against a debtor. Both federal and state laws determine whether a debtor's IRA is exempt from a garnishment action. Whether an IRA can be garnished depends on the judgment creditor and the type of debt the creditor seeks to satisfy.

Federal Taxes

The Internal Revenue Service is permitted to levy against an IRA to collect an outstanding tax obligation. The IRS must notify the taxpayer and inform him of the debt and the possibility to enter a repayment arrangement. If the debt remains unpaid, the IRS can take IRA funds to satisfy the tax obligation.

Federal Bankruptcy

In federal bankruptcy proceedings, an IRA receives a limited exemption from seizure of funds by creditors. The Bankruptcy Abuse Prevent and Consumer Protection Act of 2005 exempts up to $1 million of an individual's IRA funds from federal bankruptcy judgments. Creditors may only garnish IRA funds in excess of $1 million.

Domestic Relations Judgments

Under the laws of several states, IRA assets can be used to repay outstanding child support, alimony or other domestic relations obligations. Colorado lifts the exemption against garnishment for child support arrears, while Kentucky, Louisiana and Rhode Island permit garnishment for outstanding child support and maintenance or alimony obligations. Wisconsin permits garnishment of IRA funds to satisfy child support arrears and judgments in annulment, legal separation or divorce cases.

State Bankruptcy

Several states permit recovery of IRA contributions if they were made shortly before the filing of a bankruptcy petition. Alaska, Arizona, Kentucky and Michigan lift the exemption on garnishment of IRA funds if contributions were made within 120 days before the filing of the bankruptcy petition. Louisiana extends the time restriction to one year and Hawaii to three years before filing bankruptcy.


Some state's laws protect from garnishment IRA funds that are used to support a debtor and his dependents. Minnesota law provides that IRA amounts exceeding $30,000 can be garnished unless they are necessary to support the debtor and his spouse and dependents. Georgia, Nebraska and South Carolina exempt amounts used to support the debtor and his dependents without specifying a monetary limit.

Early Withdrawal Penalty

Early withdrawals from an IRA usually result in a penalty equaling 10 percent of the total withdrawal. However, in withdrawals for collection actions by the IRS, the 10 percent penalty does not apply. All other garnishment actions are subject to the 10 percent early withdrawal penalty.

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About the Author

Trudie Longren began writing in 2008 for legal publications, including the "American Journal of Criminal Law." She has served as a classroom teacher and legal writing professor. Longren holds a bachelor's degree in international politics, a Juris Doctor and an LL.M. in human rights. She also speaks Spanish and French.

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