What Assets Can Be Seized and Which Are Protected?

Creditors and government agencies can reach your bank accounts, a portion of your wages, vehicles, and equity in real estate, but federal and state law place firm limits on what assets can be seized and which are protected: retirement plans, Social Security and other federal benefits, a set dollar amount of home equity, and basic household goods and work tools stay off the table. Who is collecting matters as much as what you own. The IRS can levy without ever seeing a judge. A credit card company has to win a lawsuit first.

Assets a Creditor or Agency Can Reach

Cash is almost always the first target because it’s the easiest asset to apply to a debt. A judgment creditor serves a writ of execution on your bank, and the non-exempt balance is frozen.¹ If recent federal benefit payments like Social Security sit in the account, the bank must automatically protect two months’ worth of those deposits before freezing anything, without any request from you.²

Wages are next. Federal law caps garnishment at the lesser of 25% of your disposable earnings for the week or the amount by which those earnings exceed 30 times the federal minimum hourly wage.³ Many states cap it lower. If you earn near minimum wage, the garnishable amount may be very small or zero.

Tangible property such as vehicles, equipment, and valuables can be physically seized by a sheriff or marshal acting on the writ, then sold at public auction with the proceeds applied to your debt.¹ Private creditors don’t come to your door themselves; the law enforcement officer named in the writ does.

Real estate is reachable, but usually indirectly. A creditor typically records a judgment lien that attaches to the property and collects whenever you sell. Forcing an immediate sale is possible in some cases, though courts weigh factors like whether the home is your primary residence before ordering one.

Assets That Are Protected

Federal and state exemptions exist so that paying a debt doesn’t leave you homeless, unable to work, or stripped of basic necessities. Exemption dollar amounts and categories vary by state, but several federal protections apply across the board.

Retirement Accounts

Qualified retirement plans like 401(k)s and traditional pensions get strong federal protection. The law bars assigning or transferring plan benefits, which effectively blocks creditors from reaching the money while it stays in the plan.⁴ That shield holds up even in bankruptcy. The main exceptions are domestic relations orders from a divorce and certain federal tax debts.

IRAs and Roth IRAs are protected differently. In bankruptcy, the federal exemption for IRAs is capped at $1,711,975 for cases filed between April 1, 2025, and March 31, 2028, and that cap is per person.⁵ Outside bankruptcy, state law decides how much IRA protection you get from an ordinary creditor.

Social Security and Other Federal Benefits

Social Security payments are broadly shielded. Federal law bars execution, levy, attachment, garnishment, or any other legal process against them.⁶ Unemployment compensation and workers’ compensation benefits carry similar protection.⁷ The protection extends against IRS levies in most cases, though the federal government can still offset Social Security for back taxes, defaulted federal student loans, and unpaid child support.

Home Equity

The federal bankruptcy homestead exemption protects up to $31,575 of equity in your primary residence, adjusted periodically for inflation.⁵ Many states offer considerably more generous homestead exemptions, and some states let you choose between the federal and state packages. Outside bankruptcy, the homestead exemption available to you depends entirely on where you live.

Household Goods and Tools of the Trade

Even the IRS has to leave you with the basics. Federal law exempts up to $6,250 in household furniture, personal effects, and provisions, plus up to $3,125 in tools and books needed for your trade or profession.⁷ Clothing and school books for you and your family are fully exempt with no dollar cap. State exemption rules for ordinary creditor judgments typically provide similar or broader personal property protections.

Who’s Collecting Changes the Rules

The same assets aren’t equally exposed to every collector. The rules differ sharply depending on whether you’re facing a private creditor, the IRS, or a law enforcement forfeiture.

Private Creditors

A credit card company, medical provider, or anyone else you owe cannot touch your property until it sues you, wins a judgment, and obtains a writ of execution.¹ The writ only reaches non-exempt assets, and the creditor still has to find them. State exemptions apply.

The IRS

The IRS has uniquely broad power. If you owe taxes and don’t pay within 10 days of a notice and demand, the agency can levy wages, bank accounts, and other property without going to court first.⁸ It must send written notice at least 30 days before levying so you can arrange payment or request an installment agreement.⁹

The exception is a jeopardy assessment. If the IRS believes you’re about to flee the country, hide assets, or become insolvent, it can skip the normal notice and seize immediately.¹⁰ These situations are uncommon but give the agency essentially instant collection power.

Asset Forfeiture by Law Enforcement

Federal agencies such as the DEA, FBI, and Customs and Border Protection, along with state and local police, can seize property they believe is connected to criminal activity.¹¹ You don’t have to owe anyone money. The government’s claim is against the property itself.

One version of this is worth flagging because people lose property by inaction: administrative forfeiture. The seizing agency can take personal property without filing anything in court if nobody contests the seizure. Receive a notice and do nothing, and you lose the property by default. Filing a claim forces the government either to return the property or to proceed as a civil judicial case in court.¹²

The Tax Bill That Follows a Seizure

Losing property to a creditor can produce a tax hit people don’t expect. The IRS treats the transfer as though you sold the property to the creditor.¹³ If the fair market value exceeds your adjusted basis (generally what you paid), you have a taxable gain.

Any remaining debt that gets canceled can count as taxable income too. For recourse debt, the canceled amount is the difference between what you owed and the property’s fair market value. For nonrecourse debt, your amount realized is the full loan balance regardless of what the property is worth, so there’s no separate cancellation income.¹³ Creditors report the transaction on Form 1099-A, and if they also cancel remaining debt of $600 or more, they may file Form 1099-C instead of or alongside it.¹⁴

If you’re insolvent when the debt is canceled, meaning total debts exceed total assets, you may be able to exclude some or all of the canceled debt from income. You have to document the insolvency on your return.

How to Push Back, and the Deadlines That Matter

Exemptions and defenses don’t apply themselves. Every one of them has a short window to assert, and missing the window usually means losing the property for good.

Claiming an Exemption Against a Creditor Levy

If a judgment creditor levies on property you believe is exempt, file a claim of exemption with the court. The timeline varies by jurisdiction, but waiting more than a couple of weeks is risky almost anywhere. You’ll need to identify the specific exemption and show the property qualifies.

You can also attack the underlying writ or the judgment itself. If you were never properly served with the lawsuit, or if the writ has a procedural defect, the court can vacate the action. That’s the opening for people who lost by default because they never knew they’d been sued. The motion has to show an actual procedural failure, not just disagreement with the result.

Contesting a Civil Forfeiture

If the government seizes property through civil forfeiture, you must file a claim within the deadline on the personal notice letter, which can be as short as 35 days after mailing. If you never received a personal notice letter, the deadline is 30 days after the final publication of the seizure notice.¹⁵ Do nothing and the government keeps the property administratively.

Once you file, the innocent owner defense is available. Federal law says an innocent owner’s property cannot be forfeited, but the burden is on you to prove by a preponderance of the evidence that you didn’t know about the illegal conduct or that you took reasonable steps to stop it once you found out.¹⁵ If you bought the property after the illegal activity, you have to show you were a good-faith purchaser with no reason to suspect it was subject to forfeiture.

Win, and the government owes you reasonable attorney fees and litigation costs.¹⁶ That fee-shifting rule is a meaningful backstop, because hiring a lawyer to fight a forfeiture can otherwise cost more than the seized property is worth.

Challenging an IRS Levy

If the IRS levies your assets, request a Collection Due Process hearing within 30 days of the levy notice. You can argue that the levy is excessive, that you’ve already made payment arrangements, or that the IRS didn’t follow proper procedures. You can also propose alternatives like an installment agreement or an offer in compromise. Miss the 30-day window and you can still request an equivalent hearing, but you lose the right to challenge the outcome in Tax Court.⁹

1
U.S. Marshals Service. Writ of Execution
2
eCFR. 31 CFR Part 212 – Garnishment of Accounts Containing Federal Benefit Payments
3
Office of the Law Revision Counsel. 15 USC 1673 – Restriction on Garnishment
4
Office of the Law Revision Counsel. 29 USC 1056 – Form and Payment of Benefits
5
Office of the Law Revision Counsel. 11 USC 522 – Exemptions
6
Office of the Law Revision Counsel. 42 USC 407 – Assignment of Benefits
7
Office of the Law Revision Counsel. 26 USC 6334 – Property Exempt From Levy
8
Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint
9
Office of the Law Revision Counsel. 26 USC 6331 – Levy and Distraint
10
Internal Revenue Service. Jeopardy and Terminations
11
Drug Enforcement Administration. DEA Asset Forfeiture
12
U.S. Department of Justice. Types of Federal Forfeiture
13
Internal Revenue Service. Canceled Debt – Is It Taxable or Not?
14
Internal Revenue Service. Instructions for Forms 1099-A and 1099-C
15
Office of the Law Revision Counsel. 18 USC 983 – General Rules for Civil Forfeiture Proceedings
16
Office of the Law Revision Counsel. 28 USC 2465 – Return of Property to Claimant