Can the bank garnish your COVID 19 stimulus check?

May 1, 2020
Can the bank garnish your COVID 19 stimulus check?

The $1200 per person stimulus payment was one of the biggest announcements from the recent CARES Act legislation passed by Congress and signed by President Trump. Most people have already started to see the funds in their bank accounts through direct deposit;  paper checks coming over the next few months.

So what happens to your stimulus check money if it goes into your bank?  Can anyone take it?  Well, maybe.

Generally, according to this site federal and state agencies cannot intercept this money, although child support could.

However, there’s nothing currently prohibiting a private debt collector, including a bank, from offsetting the funds.  So let’s say your money gets deposited into a local bank or credit union and you owe that institution for an overdraft, a defaulted credit card, or some other debt.  Could they offset that money and use it to apply toward your debt?  Possibly, yes.

Other debt collectors may be able to levy the bank account when the stimulus money enters, gaining more than they would prior to the deposit.  Debts get paid, but the badly needed help is gone, at least until Congress considers another stimulus.

Although it appears most Chapter 7 and Chapter 13 trustees won’t seek a turnover of the funds or use the funds as part of a demand for an increased plan payment, the regulations indicate that this is a tax credit, not a federal benefit.  If that’s true, then bankruptcy exemptions other than a “wild card” or “head of household” may not apply.

We encourage our clients to review their most recently filed tax return and to determine where, if at all, their CARES Act funds are going, and then identify any potential issues receiving that money.  Check bank accounts constantly and if you are at all concerned about a judgment creditor pursuing the money, pull the cash out as soon as possible to avoid a levy.

At W M Law, when it comes to addressing debts in these tough economic times, we are….here to help.