The first round of Coronavirus-related stimulus payments began rolling out this week with approximately 80 million Americans receiving their direct deposit on Saturday. The Internal Revenue Service (IRS) states that they will continue making deposits as quickly as possible, with those who will be sent paper checks having to wait a bit longer, with that program beginning on May 4, 2020, and expecting to take months for those without direct deposit information on file with the IRS.
The funds, which are part of the $2.2 trillion-dollar Coronavirus Aid, Relief, and Economic Security Act (CARES), are intended to provide a measure of much-needed relief for individuals and families struggling during the virus-induced economic downturn. Unfortunately, over 70 million Americans are at risk of immediately losing this payment because they owe medical, credit card, or private student loan debts.
A loophole in the CARES Act, which passed in March, does not protect this money from being taken by private debt collectors or banks, although it does shield the money from being garnished to cover unpaid taxes and federal student loans. There is one notable exception, which does allow the stimulus money to be reduced or completely garnished due to overdue child support.
Because the stimulus is intended to provide emergency assistance to those most vulnerable during the Coronavirus pandemic, twenty-five state attorney generals and Hawaii’s Officer of Consumer Protection have asked Treasury Secretary Steven Mnuchin to declare the stimulus payment as exempt from garnishment. As of Wednesday, the Treasury has made no comment on this request, however, some states and local governments, including Illinois, have issued their own orders to prevent the seizure of stimulus payments from private debt collectors.
According to Lauren Saunders, the associate director of the National Consumer Law Center (NCLC), millions of Americans have court judgments against them-issued years ago-that they are completely unaware of or have not been served for in a collection lawsuit. If you believe you are at risk of losing your stimulus to garnishment, Saunders recommends monitoring the bank account linked to your 2018 or 2019 tax refund and removing the money as quickly as possible.
If you are one of the Americans who will be receiving a paper check in the coming months and you have a possible judgment against you, do not deposit that check to an account or with a bank where you have a standing garnishment order and instead sign the check over to a family member to cash it for you, the NCLC recommends. You should also consider contacting an experienced consumer law lawyer to review your case and determine what options you may have, including fighting the garnishment.
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