There are various kinds of debts a person can have over the years. Medical, mortgage, credit card, IRS, small claims, student loans etc.
And various assets. Liquid assets, retirement accounts, child’s college accounts, home equity etc
So are there general rules about which assets can be used to repay which debts if the debts end up in court, or are the laws varied from state to state?
ie, if you have a medical issue and go into medical debt and you have assets in the form of child support of $900/month, $100,000 in your 401k, money in a child’s college account, etc are all those assets treated the same as a checking account under the law, or are courts only allowed to consider certain assets to pay certain debts?
I’ve heard a wedding ring cannot be forcibly confiscated to pay off debts, but don’t know how true that is.
But if you are sued for medical bills (or credit card bills, or student loan default, etc) in court, can you be forced to spend money that would go to things like alimony or child support and redirect it to those bills, or empty your 401k?
even the most illiquid asset (property) can be used but in reality are not preferred. of course those that can be converted to cash quickly are better (and even those aren’t always acceptable.) your examples of child support, college funds and 401 are sure to have clauses that could make liquidation difficult or reduce realizable value. the following cannot be accepted from my point-of-view as a banker:
corporate assets that have explicit corporate rules on disposal and transfer. example is employees’ retirement funds.
assets with a prior lien or legal encumbrance, naturally.
financial assets that cannot be valuated reliably at the time of the negotiation
poorly marketable real estate property.
movable machinery (including vehicles)
stationary machinery (including computers) with questionable realizable value.
contingent assets of a beneficiary in a trust agreement.
Hardly matters. Wedding rings are usually just a simple gold band, not of great monetary value. It’s the engagement ring that usually has the big diamond, and is worth a lot of money.
Each state has exemption laws that protect certain assets from seizure to satisfy a judgment. Here is a fact sheet regarding the exemptions in Illinois. The Bankruptcy Code incorporates the state law of the relevant state (despite the seeming Constitutional mandate for uniform bankruptcy laws throughout the several states) to protect those assets from becoming part of the bankruptcy estate. In addition to there are also separate federal exemptions that apply in bankruptcy and at least one statute that protects limits the amount of garnishments (IIRC, it’s been a while since I’ve had to know the relevant laws in these areas).
But to answer the essence of the OP: yes, state and federal law protect certain assets from levy. The protected assets are typically the same regardless of the nature of the underlying debt/judgment. (So assets protected from being used to pay a medical debt would be protected from being used to pay a credit card bill and would be protected from being used to pay a tort claim, for example). The owner may voluntarily liquidate them if he wishes.
A minor nit, but the OP conflates assets and income. Child support payments coming to you are income, not an asset. Likewise your paycheck from your job. A checking account or IRA you own is an asset.
Assets are subject to forfeiture. Income is subject to garnishment, but analgous to the protected asset classes explained by the pros above, some classes of income are also protected by federal or state statute.