Are IRAs in Illinois Exempt From Creditors?

by Amanda McMullen ; Updated July 27, 2017
Illinois protects IRAs, 401k plans and profit-sharing plans from creditors.

If you owe money to creditors and you stop making payments, you may wonder which of your assets they can seize. Creditors can take possession of most types of property. Specific regulations pertaining to creditors differ by state, but, in Illinois, the money contained in your individual retirement account (IRA) typically is exempt from seizure for unpaid debt.

About IRAs

An IRA is an account an individual uses to save money for retirement. Other retirement plans, such as 401k plans, may receive funds from employee and employer contributors. However, an IRA receives funds only from the owner. The owner can deposit as much as he wants into his IRA up to a set maximum. Contributions to a traditional IRA typically are tax-deductible. When the contributor withdraws money from the account in retirement, the government taxes it as income.

Illinois Law

If an Illinois court issues a judgment against you, a creditor can take possession of any of your non-exempt property, including real property, personal property, wages, vehicles and bank accounts. Most judgments last for seven years. Illinois doesn't allow creditors to take money from a debtor's exempt property, which includes life insurance, veteran's benefits, Social Security benefits, alimony, unemployment benefits, 401k plans, pension plans and IRAs.

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Bankruptcy

The federal government considers IRAs exempt from bankruptcy. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 allows states to either use federal exemption guidelines for bankruptcy or create their own list of exemptions. At the time of publication, Illinois has chosen to use its own list of exemptions, but Illinois includes IRAs on this list and provides partial or full protection for IRAs during bankruptcy.

Inheritance

Though Illinois won't allow creditors to take possession of funds from an IRA you created, it may allow them to take funds from an IRA you inherited. Some states, including Minnesota, have determined that inherited IRAs deserve the same protection as regular IRAs. However, other states, including Texas and Illinois, have concluded that inherited IRAs are not exempt from creditors or bankruptcy proceedings. In these states, creditors can seize inherited IRAs.

Considerations

Though IRAs are exempt from garnishment from most creditors, the Internal Revenue Service can seize them for unpaid taxes. IRAs are also subject to garnishment for family maintenance payments, such as alimony or child support.

References

About the Author

Amanda McMullen is a freelancer who has been writing professionally since 2010. She holds a bachelor's degree in mathematics and statistics and a second bachelor's degree in integrated mathematics education.

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identity thief definitionrhode island statute of limitationshow long does nicotine stay in system life insurancebha navynordstrom return policypennsylvania unemployment debit cardnolo living trustaccumulated depreciation debit or creditca controller unclaimed moneydividends per share formulaexamples of the elastic clauseleasing with negative equityhow many years can you carry forward capital losseschase money transfer limitcancel littlewoods accountwhen is a cheque stale datedpreferred stock redemptionhow to calculate an annuityupcoming dividend stockslas vegas housing authority section 8how to calculate self employed incomehow does leasing a car affect your creditput call parity examplevalue of ee savings bonds calculatormiami dade clerk officecapital budgeting wikifers benefit calculatorknoxville food stampshow to become a journeyman plumberquit claim deeds floridado board members of nonprofits get paidformula to calculate dividend yieldcalculate beta portfoliodebt worth ratio calculationadvantages of refinancinghow to collect spousal social security benefitswithdrawal tspappraiser incomewhere can i use my ebt cash cardmortgage payoff processsoccer scholarships for high school studentswestern union money order serial numberesthetician grantsstate of texas real estate license requirementsadvantages and disadvantages of a nursemycompass gais interest paid on car loan tax deductiblegoogle stock symbol lookupmichigan medicaid vision coveragereciprocal access easementrollback taxes in texas2013 capital gains tax calculatorfederal lemon law used carexplain insurance deductiblesi got a full ride scholarshiproth or traditional ira for young personcalculate taxes on lottery winningsinherited ira tax penaltyunited states healthcare system pros and conshow to fill out w2 for workconverting primary residence to rental propertywhat is the difference between a w2 and w4safewayinsurance com make a paymentdoes medicaid cover dental implantswhat is reconveyancepromissory note guaranteeaes student loandfederal tax rate for lottery winningsil payroll tax calculatorstock market fluctuations definitionpower of attorney safe deposit boxaccounting entry for forfeiture of sharessbi credit card activationbond holding period returnrental property mortgage tax deductionirs form 1040awhen does a check become stale datedeservice.metlife.com

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identity thief definitionrhode island statute of limitationshow long does nicotine stay in system life insurancebha navynordstrom return policypennsylvania unemployment debit cardnolo living trustaccumulated depreciation debit or creditca controller unclaimed moneydividends per share formulaexamples of the elastic clauseleasing with negative equityhow many years can you carry forward capital losseschase money transfer limitcancel littlewoods accountwhen is a cheque stale datedpreferred stock redemptionhow to calculate an annuityupcoming dividend stockslas vegas housing authority section 8how to calculate self employed incomehow does leasing a car affect your creditput call parity examplevalue of ee savings bonds calculatormiami dade clerk officecapital budgeting wikifers benefit calculatorknoxville food stampshow to become a journeyman plumberquit claim deeds floridado board members of nonprofits get paidformula to calculate dividend yieldcalculate beta portfoliodebt worth ratio calculationadvantages of refinancinghow to collect spousal social security benefitswithdrawal tspappraiser incomewhere can i use my ebt cash cardmortgage payoff processsoccer scholarships for high school studentswestern union money order serial numberesthetician grantsstate of texas real estate license requirementsadvantages and disadvantages of a nursemycompass gais interest paid on car loan tax deductiblegoogle stock symbol lookupmichigan medicaid vision coveragereciprocal access easementrollback taxes in texas2013 capital gains tax calculatorfederal lemon law used carexplain insurance deductiblesi got a full ride scholarshiproth or traditional ira for young personcalculate taxes on lottery winningsinherited ira tax penaltyunited states healthcare system pros and conshow to fill out w2 for workconverting primary residence to rental propertywhat is the difference between a w2 and w4safewayinsurance com make a paymentdoes medicaid cover dental implantswhat is reconveyancepromissory note guaranteeaes student loandfederal tax rate for lottery winningsil payroll tax calculatorstock market fluctuations definitionpower of attorney safe deposit boxaccounting entry for forfeiture of sharessbi credit card activationbond holding period returnrental property mortgage tax deductionirs form 1040awhen does a check become stale datedeservice.metlife.com
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