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The following are examples of prohibited transactions with a traditional IRA.
---Borrowing money from it.
---Using it as security for a loan.
Thus, funds in your IRA may not be used as a collateral of your loan and may not be garnished by creditors.See also this article - http://server1.biggerpockets.com/articles/320-is-your-ira-safe-from-creditors- In a huge victory for IRA and self-directed IRA owners everywhere, the U.S. Supreme Court ruled last week that IRAs receive Federal Creditor Protection. This means that creditors cannot seize assets in an Individual Retirement Account. In additional assets in IRS accounts are protected under state laws - specifically for Illinois - see this article with references - http://www.harrisonheld.com/library/IRAs.and.Bankruptcy.in.Illinois.pdf
Illinois provides statutory protection for IRA owners against the claims of creditors. Specifically, the Illinois legislature has determined that an Illinois debtor's interest in an IRA should be exempt from judgment.
There are exceptions to the Illinois exclusion from judgment for IRAs. Child support payments are one example.19 Additionally, an annuity created in
settlement of a personal injury claim does not come within the reach of the statute.20 But exceptions are limited and usually dictated by public policy.
So far - your IRA funds may not be attached for failure to pay a loan.