Can They Garnish My Retirement for a Foreclosure?


State laws determine whether a lender can initiate collection activities on a balance that remains after a foreclosure sale. As of this publication, 12 states prohibit lenders from collecting on a deficiency balance at all. Although laws in the remaining 38 states allow mortgage lenders to sue you, and file a motion to garnish wages and funds held in bank accounts, most retirement funds are exempt from garnishment.

Exempt Retirement Funds

Federal and State Benefits

A judgment lender can’t garnish federal retirement benefits to collect on a foreclosure deficiency balance. These include Social Security, military retirement pay and annuities, and railroad retirement benefits.

State retirement benefits also are exempt from a foreclosure garnishment order. These include state police and teacher’s retirement pay. Additionally, funds held in a 403(b) annuity retirement plan are exempt.

Employer-Sponsored Retirement Plans

The federal Employee Retirement Income Security Act of 1974 stops judgment lenders from garnishing employer-sponsored retirement benefits to settle any past due debt, including a foreclosure deficiency balance. The federal law preempts any state laws that may exist, therefore, funds in a pension plan, as well as funds in ERISA covered plans -- including 401(k), Savings Incentive Match Plans for Employees of Small Employers, and Simplified Employee Pension plans -- are safe from garnishment.

Self-Directed Retirement Plans

Federal laws do not protect money held in traditional or Roth Individual Retirement Accounts. This includes money rolled or transferred to an IRA from an ERISA-protected plan. For example, if you roll funds from an old 401(k) plan into a traditional IRA, federal laws won't protect the rollover or transfer from a foreclosure garnishment order. However, some state laws do protect IRA funds from garnishment.

Claiming Retirement Plan Exemptions

Co-mingling retirement money with other funds in a savings or checking account could mean these funds will be included if the bank freezes your account after receiving a garnishment summons. If this happens, you have a short window in which to file a Claim of Exemption to show that certain funds in the account are exempt.


  • Each state specifies its own time window for filing an exemption claim.

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