The recently passed American Rescue Plan includes another stimulus check in the amount of $1,400 but be very careful because this relief payment will be different from the rest. Unlike the first $2,000 check and the second $600 check, this payment can be garnished for unpaid debts.
Typically, there are three kinds of debts that can be paid via garnishment:
- IRS tax debt
- Other governmental debt
- Private debt
The first two stimulus checks were protected from all three types of debt but this upcoming payment is only protected from tax and governmental debt and outstanding child support. It is still vulnerable to garnishment by private creditors.
On Monday, March 8th, 2021, consumer and banking trade groups sent a letter to Congressional leaders pleading for this stimulus payment to be exempt from garnishment saying, “otherwise, the families that most need this money – those struggling with debt and whose entire bank accounts may be frozen by garnishment orders – will not be able to access their funds.” They urged Congress to pass a separate bill in order to prevent the checks from going directly to people’s creditors.
Unfortunately, this protection was not enacted by the legislature and therefore these stimulus funds remain accessible to banks and private creditors. This is particularly important here in Connecticut where the state collection courts have reopened allowing old garnishments to continue and new garnishments to be granted and enforced. Be careful since creditors know about your existing accounts.
Since it is difficult to change bank account information with the IRS, the only other way to prevent garnishment to the direct deposit is to close the account and wait longer to receive the check by mail. If you receive paper checks, you could cash it at retail stores or check cashers, but you run the risk of very high processing fees.
We stay updated on all governmental changes and adjustments made during this pandemic in order to provide the best advice and available options. If you are facing overwhelming debt and are concerned about your incoming stimulus check, please do not hesitate to contact a debt attorney from The Law Offices of Neil Crane call us at (203) 230-2233.