A bankruptcy attorney explains exactly when creditors can — and can't — garnish your 401(k) to collect debts

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Americans, on the whole, owe a lot of money. Collectively, households across the country owe $18.8 trillion (1) to creditors, with mortgage debt accounting for around $13.1 trillion of that amount.

Experian data also showed the average American's debt was $104,755 as of June 2025 (2). That's a substantial sum given that the median household income was just $83,730 in 2024 (3).

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With many households owing more than they earn all year, it's perhaps not surprising that around 47% of Americans worry about debt every day (4).

If you're one of them, you can take some solace that certain retirement accounts, like your 401(k), may have protection from creditor claims. But this doesn't mean that protection is foolproof or unlimited, so knowing your rights is key.

Pretend, for example, that Anthony is 45, broke and has over $50,000 in debt. However, his 401(k) is doing well. Anthony is now worried that his retirement funds could be taken to pay what he owes. But is that a legitimate concern, or is his 401(k) safe?

401(k) accounts are usually protected from creditors

To start, there's some good news for Anthony: His 401(k) is most likely protected, at least for now.

You can thank the Employee Retirement Income Security Act of 1974 (ERISA) for that (5).

"ERISA protects most employer-sponsored 401(k) plans, prohibiting them from being assigned or alienated," Casey Yontz (6), a bankruptcy attorney with more than 18 years of experience and founder of U.S. Bankruptcy Help, told Moneywise. "This prevents ordinary creditors like credit cards, medical creditors, and personal loan lenders from being able to reach your 401(k)."

Because of these protections, Yontz explained that in most cases, "They cannot garnish money held in a 401(k), even if they successfully sue you and get a judgment."

There are some exceptions to this general rule

"Other types of creditors can reach your 401(k)," Yontz explained. "The IRS, for example, can levy your 401(k) and other retirement accounts to collect certain unpaid federal taxes."