Fine Print

Can my stimulus check be garnished?

The third round of stimulus payments isn't protected against garnishment by debt collectors


The third coronavirus stimulus legislation hasn’t protected against your check being garnished by private debt collectors, though the second one did. There are additional steps you can take to prevent the loss of your stimulus check.

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To deal with the grave unemployment fallouts from the coronavirus pandemic, the government’s CARES legislation passed in 2020 allowed for stimulus payments of up to $1,200 for an individual, with an additional $500 per dependent child, based on your income.

In a second round of stimulus Congress passed Dec. 21, 2020, the government paid out $600 to individuals. And in a third round of stimulus, the $1.9 trillion American Rescue Plan, passed March 11, 2021, eligible Americans are slated to receive another round of stimulus checks.

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Third stimulus package hasn’t provided garnishment exemption

The first stimulus legislation spelled out that your check could not be used to offset certain debts to the federal or state governments, such as for federal taxes you owe. Past due payments on federal student loan debt were also exempt.

Even then, it didn’t protect against your check being garnished by private debt collectors in case they have a judgment against you to collect the funds, leaving the stimulus payments open to this danger. However, the second round of stimulus payments were protected by the stimulus legislation against garnishment by debt collectors. The payments also couldn’t be used to offset old child support enforcement debts owed to state governments.

Lauren Saunders, associate director at National Consumer Law Center, noted, “Debt collectors grabbed many of the first stimulus payments, but fortunately it will be hands off for these payments.”

Unfortunately, the third round of stimulus payments, of up to $1,400 for eligible individuals and $2,800 for eligible couples, has not been made expressly off limits to debt collectors once the monies hit your bank account. However, the NCLC, together with other consumer advocates and the American Bankers Association, is urging Congress to remedy this situation.

There is a lesser danger that banks could take the funds to offset any debt or fees you owe them. 

Attorneys Lisa Saunders and Margot Saunders of the National Consumer Law Center wrote in an online advisory that every state allows consumers to make their case in court that their bank account funds cannot be seized, but they can do so only after the funds are frozen. Unfortunately, with the pandemic situation, it is difficult to exercise such rights.

See related: Credit card issuers offer cardholders relief amid coronavirus fears

States and officials act to provide garnishment protections

Various government officials have also weighed in to stop your stimulus check from being garnished.

For instance, Massachusetts Attorney General Maura Healey has put in emergency debt collection regulations that spell out that creditors and debt collectors cannot garnish stimulus checks. Ohio Attorney General Dave Yost has taken similar action.

And the governors of Illinois and Washington have suspended wage garnishments for a period of time. Healey, Yost and 23 other state attorneys general, as well as the Hawaii Office of Consumer Protection, in 2020 sent a letter to then-Treasury Secretary Steve Mnuchin urging him to declare the stimulus checks to be benefits payments that cannot be garnished.

Similarly, legislators have stepped up to protect the stimulus checks. Senators Ron Wyden (D-OR), Elizabeth Warren (D-MA), Sherrod Brown (D-OH) and Josh Hawley (R-MO) have all urged the treasury secretary to make the stimulus checks off-limits to garnishment. Brown and Warren have also called on banks to not seize stimulus checks.

In a letter responding to Senators Brown and Warren, the American Bankers Association, a banking industry trade group, said “depository institutions have no discretion and are obligated to comply with applicable state laws and court-ordered garnishments.”

That’s why the ABA has also asked Congress to clarify that these payments are protected from garnishment orders that they would otherwise be obligated to follow.

As for the possibility that banks themselves might use the checks to offset any amounts their customers owe them, the ABA noted that many banks are already waiving late fees and overdraft fees.

According to the ABA letter, “Many of our depository institutions are taking extraordinary steps to ensure customers are able to access the full economic impact payment, notwithstanding whether the customer has a negative balance in the account.”

See related: Can the bank take my tax refund to pay off my old card debt? 

How to prevent your stimulus check from being garnished

You could also take some proactive steps to ward off the possibility of losing your stimulus check.

NCLC and CRL attorneys advise that you could take the following steps:

  • Move the stimulus money out of the account as soon as possible, either taking it in cash or through a debit card or electronic payment to pay for necessities.
  • Ask for your payment to be made to a prepaid card or an account at a smaller bank or credit union, since creditors are typically not watching these venues.
  • If you already receive federal benefits, such as Social Security, there is garnishment protection for up to two months of such payments. You should take out enough funds to make sure your stimulus check does not push your balance over the safe limit.
  • Ask for your stimulus check to be sent by mail – although you risk getting it later – and cash it rather than depositing it into your bank account.
  • See if you can work out a payment plan with your creditors.
  • If your money has been garnished, you could try to get it back from the bank or file a complaint with your state attorney general, financial regulators, the Consumer Financial Protection Bureau or the Federal Trade Commission.

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