I'm thinking no

Depends on the state. Bankruptcy law passed in 2005 exempts up to $1million in IRA and Roth assets from bankruptcy.

I'm thinking state too , Janet . O.J. retired in Florida for a dang good legal reason .

State law does determine.

SEP and SIMPLE IRAs have unlimited protection from bankruptcy.

While traditional IRAs are limited to $1M, this limit does not include amounts that were rolled over or transferred from employer sponsored plans

I'm thinking that "subject to creditors" is different than being subject to creditors when you are in bankruptcy. I know of a couple of non-bankrupt clients who know full well creditors can get ahold of IRA funds when you are not bankrupt. Watch out for this.

whether non BKcy credits can attach IRAs depends on state law. In most states (NJ and NY) IRAs are exempt from creditors. IRAs usually include SEPS and simples. IRA assets are always subject to collection for taxes by IRS or other fed agencies for restitution.

I must be slow today, non bankruptcy creditors? Are we talking something like mechanics lien?

no. Its any creditor who gets a judgment against an IRA owner, e.g, IRA owner defaults on a loan for 10k and court enters judgment for lender. Creditor can collect 10K from IRA unless state law protects IRA against creditor claims.

Or perhaps an individual is sued (and loses, goes to jail, etc.) and the courts later enter a judgement for the winner.

Having the money in a qualified plan still protects thios individual, but if the funds are in an IRA, then State laws apply, even for rollover money from a qualfied plan, unless the individual declares bankruptcy (I think), then they get protection? (mjb, please correct me if that is incorrect).

I am under the impression that a IRA is a third party, and not suitable. Maybe I am attending the wrong classes.

First the IRA owner can not default on the loan, that would be a violation of IRS rules. If the owner of the IRA signed personally for the loan, thay would be a prohibited transaction, and may disqualify the IRA. Your IRA custodian, should never allow this to happen.

Therefore I am making the following assumptions in answering your question:
a) An IRA account exits with you as the owner
b) The IRA obtained a loan on its own, and you did not personally sign the note
c) The loan is in default for 10k
d) There are no other parties named on the judgment
d) There are sufficient assets in the IRA to substantially pay the 10k

I must tell you that I am a Judgment Enforcement Professional, I enforce money judgments for a living. i will tell you what i would do, if I had been assigned this judgment.

I would go and get a order of execution against the IRA account. I would serve the order on the custodian of the account and sieze the funds in the account (up to 10k + costs). If there was little cash and other assets, I would move to have the assets sold.

The only way I would not persue the IRA account, for the time being, is if there were very little of value in the account. In that case I would send you and your custodian, interrogatories asking all kinds of questions about the account, in an attempt to find assets frauduently transfferd, and sieze them. If that failed, I might choose to wait until such time as the account had a more positive value.

Hope this helps you to understand, what a trained professional would do to recover the 10k + costs.

Now it is time for a little real world advice. Judgment Enforcement is not free, while I never charge a client anything, I do get paid out of the proceeds. Attorneys, are often worse, they charge a couple hundred dollars, weather they get results or not, and they take their everloving time, more time=more pay. Of course a creditor could do all this himself, but does know what to do, or have the time?

My advice is to settle the judgment for cash. You have the right to offer less than the full amount of the judment. If your judgment-creditor approached me I might be enclined to offer him 20-35% to buy the judgment and enforce it myself.

If you can offer up to 50%-65% of this to your creditor as full payment, they may take it. Remember to start low 25% and work up. Remember that the CASH MUST come from the IRA, not you!

Sometimes, I buy a judgment at a deep discount and then settle it with the judgment-creditor at a discount.


- Steve at JUDGMENTcare ......d.o.t.....c..o..m

Steve:

Thank you for coming to the party two years after it ended. It must be a slow season for 'judgment enforcement professionals' for you to spend so much time discussing a debt collection procedure for a loan made by an IRA that would be subject to UBIT tax (See IRC 512) ahead of any creditor's claims.

The loan discussed in the prior posts was a generic unsecured loan that the IRA owner would enter into, e.g., to buy a car, not a loan taken out by the IRA as a separate entity and secured by IRA assets. Whether a general creditor can enforce a judgment against the IRA account of a judgement debtor depends solely on state law. For example, NJ law (NJSA 25:2-1(b)) protects IRA assets from all creditors except for fraudulent transfers or a QDRO. NY has a similar provision. see CPLR 5205(c).