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Creditors may seize some financial assets

Arizona credit card holders who have trouble making their payments due to job loss, divorce, medical expenses or other unforeseen circumstances may worry about the safety of their retirement funds if they default on their credit card agreement. Banks and other creditors must go through a process before they are able to garnish wages or seize funds from a bank account. In most cases, though, retirement accounts are exempt from such seizures.

As long as retirement funds are in a protected account, such as an IRA, 401(k) or pension, they cannot be seized by creditors. Social Security benefits are also exempt. A creditor who has secured a judgement against a credit card holder may get approval from the courts to seize the funds from a bank account. Because federal benefits are typically direct-deposited into a bank account, they may be unavailable for a period of time while the bank determines the source of the funds in the account.

Customers who have enough regular income to make reasonable payment arrangements with their credit card company may be able to avoid a lawsuit, wage garnishment and seizure of their bank accounts by contacting the bank and requesting a payment plan. Bankruptcy is also an option for customers who don't have the resources to make regular payments.

An attorney may help a client determine if bankruptcy is the best solution to their financial problems. By filing for bankruptcy protection, a person who is in default on a credit card debt can halt collection actions immediately so the creditor cannot seize their bank accounts or garnish their wages. A bankruptcy attorney may help a person faced with overwhelming credit card bills have their debts discharged through the bankruptcy courts.

Source: FOX Business, "Can Credit Card Company Garnish IRA?", Jeanine Skowronski, July 10, 2014

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  • MCBA | Maricopa County Bar Association
  • State Bar of Arizona
  • ABA | American bar Association | Defending Liberty Pursuing Justice
  • Oregon State bar
  • NACBA | National Association of Consumer Bankruptcy Attorneys
  • NACA | National Association of Consumer Advocates
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