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What kind of assets are protected from creditors and the IRS?

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Answered 2006-07-24 12:28:25

Property and assets that are exempt from creditor attachment or seizure are determined by the state law in which the debtor resides. Several states such as Florida and Texas have unlimited protection of homesteads while in others the protection depends upon factors such as marital property with a single debtor, disabled and so forth. Generally these exemptions will be the same as those allowed in bankruptcy with additional non bankruptcy federal exemptions possibly being applicable. Personal property and income exemptions vary greatly from state to state. All Social Security, RRB, disability benefits, government pensions, public assistance and most private pensions are exempt from garnishment or seizure by creditors under both state and federal law. However, in almost every state bank accounts are subject to levy regardless if they are joint or separately held. Therefore persons should not mix exempt funds with non exempt funds to prevent a bank account from being "frozen" for evaluation by the court. There very little real or personal property that is exempt from IRS attachment, seizure or forced sale. The very rare exception is marital property held by Tenancy By The Entirety when only one spouse owes tax arrearages, and even that is not a sure thing. The IRS can literally take whatever steps necessary to recover taxes owed without due process of law. It is a misconception that the IRS cannot garnish SS and other such benefits. The maximum garnishment for such is 15% with the first $750 being exempt. For standard income 25% garnishment applies with the possibility of a higher or reduced percentage depending upon the circumstances.

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