It is not uncommon to see credit card companies taking legal action against account holders for failing to make timely credit card payments. If this happens, there are several steps that a creditor can take to collect on that debt. However, is it possible to garnish funds in an IRA? The answer is yes and no depending on the circumstances.
When funds are held in an IRA or other qualified retirement account, they generally cannot be touched by creditors. Once the funds are withdrawn, however, those funds may be seized by a creditor who has obtained a judgment and is trying to collect. Therefore, it may be possible for a creditor to seize funds that have been withdrawn from an IRA and put into a bank account.
While a garnishment is limited to the amount of money in the bank account at the time it is made, a creditor may be able to make multiple attempts to collect on the debt. For those who think that they may have trouble paying off their debt, it may be worthwhile to consult with the credit card company to attempt to arrange a debt repayment plan that works well for both sides.
Credit card companies have the right to collect on a valid debt. Although they are limited as to what funds they can seize to pay that debt, they may take legal action against a cardholder until the debt is repaid. Anyone who is seeking relief from such debt may wish to speak with a bankruptcy attorney who may be able to work with creditors to come up with a debt settlement to take care of the outstanding obligation.
Source: FOX Business, "Can Credit Card Company Garnish IRA?", Jeanine Skowronski, July 10, 2014