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Coronavirus stimulus checks are not protected from debt collectors

White House commits to sending stimulus checks within 2 weeks
Posted at 10:07 PM, Apr 10, 2020
and last updated 2020-04-10 22:07:43-04

TALLAHASSEE, Fla. (WTXL) — Next week, millions of Americans should begin receiving direct deposits from the federal government as part of the $2 trillion coronavirus rescue package enacted last month, but the National Consumer Law Center is warning that, in some cases, private debt collectors may still be able to access that money.

The CARES Act does not currently prohibit private debt collectors from garnishing stimulus money in a personal bank account.

This means that once a direct payment is deposited, it’s possible a private debt collector could serve a garnishment order, if the person is behind on debt payments and subject to an outstanding court judgment in order to seize that money.

The Treasury Department already has rules that protect social security payments from this type of garnishment, and some lawmakers want the agency to apply those rules to the coronavirus stimulus payments.

“If people are worried about debt collectors, they should take the money out right away,” said Lauren Saunders, associate director at the National Consumer Law Center.

The NCLC is advising anyone who thinks they may be at risk of garnishment to keep a close eye on their accounts and move the money out as soon as it arrives. Withdraw it as cash, transfer it electronically, or using it to pay for groceries or other essentials, they say.

For clarification, the federal government cannot take money owed for defaulted federal student loans or back taxes from a stimulus check.

The federal government can take the money for back child support.

The CARES Act also blocks the IRS from taking money from your tax refund for defaulted student loans.

Crucial quote: Senators Sherrod Brown (D-Ohio) and Josh Hawley (R-Mo.) “If Treasury fails to take action, the CARES Act direct payments are at risk of being seized by debt collectors. That is not what Congress intended,” Senators Sherrod Brown (D-Ohio) and Josh Hawley (R-Mo.) wrote in a combined statement. “We came together to pass the CARES Act to help American families pay for food, medicine, and other basic necessities during this crisis... we ask that you immediately exercise your authority to protect these payments from private debt collectors.”

A few states, including Massachusetts and Texas, have issued their own emergency regulations to prevent debt collectors from issuing new garnishment orders, but most states don’t have those protections.