Can Creditors Take Your Stimulus Check Out Of Your Bank Account
Delinquent Loan Debt: Yes The same is true for any type of loan or other delinquent debt. If the creditor has gone through the process of suing you and has obtained a judgment, they can move on to levy your accounts. That means any stimulus money deposited into those accounts may be subject to garnishment.
Third Stimulus Checks: Collectors Can Seize $1400 Payment If You Have Unpaid Debts
by: Natasha Anderson, Nexstar Media Wire
WASHINGTON Americans with unpaid debts could have their stimulus checks seized by collectors.
Unlike with previous economic payments, debt collectors will be able to garnish money from the third round of stimulus payments that are being distributed as early as this weekend by the Department of Treasury and Internal Revenue Service.
The American Bankers Association is urging lawmakers to pass legislation that would protect the badly-needed funds. In a letter Wednesday, the ABA stated that they have joined a coalition of financial and consumer advocacy groups urging Treasury Secretary Janet Yellen to support standalone legislation to ensure that these payments are shielded from assignment and garnishment.
The ABA said that if Congress does not act, banks and other financial service providers will have to comply with court ordered garnishments.
It is simple to code the payments as exempt, and we believe it is imperative that Congress ensure that these next stimulus payments are treated as benefits subject to the federal exemption from garnishment, members of the coalition said in a statement. Otherwise, the families that most need this moneythose struggling with debt and whose entire bank accounts may be frozen by garnishment orderswill not be able to access their funds.
Stimulus Checks Can Be Garnished By Debt Collectors
KANSAS CITY, MO While some people have already received their stimulus payments, most people will not see the money hit their bank accounts until this morning. Some people will not get the money at all.
Debt collectors can issue a garnishment on the stimulus payments. While the government cannot garnish the payments due to things like back taxes and child support payments, private debt collectors can issue a garnishment for student loans, medical and credit card debt.
Last week, President Joe Biden signed a $1.9 trillion relief package. People who make $75,000 or less annually will receive up to $1,400. Couples who make $150,000 or less will receive up to $2,800. Additionally, people will receive $1,400 for each dependent child.
For those who owe money, to avoid garnishment, they can contact the debt collectors and set up a payment plan. When it comes to medical debts, people can typically pay a nominal amount of the debt owed each month. This will shield them from any legal actions, like garnishments.
People may also want to check their credit reports to ensure no bills are in collections. Many monitoring services, like Annual Credit Report, will provide people will a free report.
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Tips For Protecting Your Stimulus Funds
These economic impact payments are meant to help with living expenses during a turbulent time for the country. If you know you have an account in collections and are worried about your stimulus funds being taken for those rather than your immediate needs, you can take a few proactive steps to help protect the incoming money. A little research and planning can go a long way.
Can My Stimulus Check Be Garnished For Credit Card Debt

The American Rescue Plan Act is a federal law that was passed to help provide a third round of relief to Americans during the COVID-19 crisis. Like the two acts before it, the ARP Act included stimulus payments to many individuals and families. But those who are struggling with debt might wonder: Can my stimulus check be garnished for credit card debt or other money owed.
The short answer is yes, but it depends on the type of debt youre dealing with. Find out more in the short guide below.
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Incarcerated People Are Eligibly For All 3 Stimulus Checks
Though there was a lot of confusion about this at first, people who are in prison and jail are eligible to qualify for the first stimulus check of up to $1,200 per adult, as well as the second check of up to $600 and the third check of up to $1,400. A ruling this fall from a federal judge in California required the IRS to contact those incarcerated who can file a claim for a stimulus check. As with others who are missing any of the payments, you’ll need to fill out 2020 Form 1040 or 1040-SR to claim either the first or second check.
Debt Collectors Could Be Coming For Your Stimulus Check
WEST PALM BEACH, Fla. Many Americans have started to see the latest round of stimulus checks flow into their bank account after President Joe Biden signed into law the $1.9 trillion American Rescue Plan last week.
However, one group may be left out of receiving the free cash.
Debt collectors are apparently ready to snap up the checks of those who owe them.
Dee Hemsley of Delray Beach, Florida said she has been locked out of her Wells Fargo bank account, which is now empty of the unemployment benefits she had been collecting.
“Since Thursday, I’m left with no money,” Hemsley said.
She said it’s the work of a debt collector, who may have been anticipating the $1,400 in federal help that she is due to receive.
“The debt collectors are freezing accounts because they want to take the stimulus money,” Hemsley said.
Financial experts say it is possible.
Congress passed the American Rescue Plan under budget reconciliation, leaving the payments open to private debt collectors for things like credit card, medical or student loan debts.
“We were not able to protect that because of the technicalities on how we passed the bill,” Rep. Lois Frankel, D-Florida, said.
With no protection, people like Hemsley are now subject to losing the $1,400 as soon as it hits their frozen accounts.
What happens is they will freeze and seize the bank accounts of the people that have the direct deposit for sure, said Paul Oster, a certified FICO credit expert.
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White House Says Stimulus Cash Deposits Will Come As Early As This Weekend
Wyden and Republican Sen. Chuck Grassley sponsored a similar bill last year to stop garnishment of the first $1,200 payments authorized by the CARES Act. The measure passed in the Senate last July but did not advance in the House.
While banks and even some debt collectors may believe the checks are protected from garnishment, depository institutions are required to comply with court orders and will have to fork over the money to creditors who try to garnish or freeze bank accounts, the banking groups said.
People who want to avoid having their payments garnished by private collectors could close the bank account where the funds would be deposited but that means their check would likely take longer to arrive, CNBC reported.
The good news is that taxpayers reportedly wont have to worry about the government coming after their payments.
The stimulus legislation prevents the feds and other officials from taking the money to pay child support, back taxes or other government debts, according to USA Today.
Banks And Creditors Might Be Able To Take Your Stimulus Checks In This Circumstance
With the first stimulus check, private banks and creditors were able to seize your payment to cover an outstanding debt. However, some states, such as California, issued orders forbidding banks and creditors from garnishing your stimulus check. With the second stimulus check, your payment was protected from bank garnishment and from private creditors and debt collectors, according to the text of the law. The third check is also supposed to be protected from bank garnishment, though not from private creditors and debt collectors.
However, there’s one major caveat here. Individual banks can decide whether they want to use your stimulus direct deposit payment to cover overdraft fees, according to a New York Times report. This is because, for most people, their stimulus check is deposited into the same bank account where they also receive tax refunds.
Although for the second check large US banks including Bank of America, Citigroup, JPMorgan Chase and Wells Fargo said they would temporarily zero out their customers’ negative balances so that they could access their stimulus money, some regional and community banks still garnished that money to pay overdraft fees, or were considering customer requests on a case-by-case basis, according to the Times. If this has happened to you, you can try contacting your bank to ask for a temporary overdraft waiver, but it may not be granted. This is likely to be the case for a third check as well, Watson said.
Also Check: Update On 3rd Stimulus Check
Landlords And Nursing Homes Can’t Demand You To Use Your Stimulus Check Money To Pay Them
The CARES Act prevented landlords from demanding you give them your stimulus check to make a rent payment. Nursing homes and care facilities also cannot ask you to hand over your stimulus check money to meet a payment, according to the IRS. The second stimulus check followed the same rules. If someone pressures you or threatens you with eviction in exchange for your payment, make sure that you know your rights in regard to stimulus checks and to the eviction moratorium that lasts through March 31.
These rules generally hold for the third payment as well. However, if a private creditor or debt collector obtained a judgement against you, they could garnish your payment, according to Watson.
Contact Your Creditor To Make Arrangements
If you agree that you owe the money and you can afford to make some type of arrangement, contact your creditor to work out a deal. Make sure you get any agreement in writing so you have proof that the creditor agreed not to move forward with further legal actions or garnishments in exchange for agreed-upon payments from you.
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Your Third Stimulus Payment Can’t Be Seized To Pay Child Support
Under the CARES Act from March 2020, your first stimulus check could be seized by state and federal agencies to cover past-due child support. That rule changed for the second stimulus check, which couldn’t be taken if you owe money for child support. And like the second check, your third check cannot be taken to pay overdue child support.
According to the text of the bill, payments will not be subject to reduction or offset for past-due federal or state debts, or by other assessed federal taxes that would otherwise be subject to collection. However, if you end up having any money missing from your third check and have to claim it on your tax return next year, that money could be subject to garnishment . The best thing to do is to file your 2020 tax return as soon as possible, so the IRS has your most recent information on file.
People with children will benefit from other aspects of the bill outside of the third stimulus check. For example, updates to the Child Tax Credit increase the existing amount to as much as $3,600 per child. There are also some other tax breaks to take advantage of, including for child care.
Who Can Legally Take Your Stimulus Check Money

Government can withhold stimulus checks bill collectors cant ask for stimulus money to pay off old debt
CLEVELAND, Ohio – 19 News Investigative Reporter Hannah Catlett continues to field viewer questions about stimulus checks.
Do you really have the right to choose how to spend that money?
Turns out, the government is allowed under federal law to withhold some or all of someones stimulus check in some situations.
But, we discovered that debt collectors could get in trouble for settling up on an old bill right now.
Attorney General Dave Yost posted a video to Facebook, assuring people that they are protected from having to fork over their stimulus checks to pay off old debt.
I want you to know that under Ohio law, those payments are protected from bill collectors, he said. The money was meant for an emergency in a time like this.
He says the payments are meant to put food on the table and keep a roof over your familys head.
It wasnt meant to go pay off an old bill, Yost said.
His office wants to know if someone tells you otherwise.
In the event that somebody to nab your stimulus payment for an old debt, let us know. We might be able to help you, Yost said.
While that message is reassuring to most, there is one type of debt that can prevent someone from getting a check.
In fact, just like someones tax return can be taken to put towards back child support, the stimulus check can be intercepted too.
How can I make my child support payments during COVID19?
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How Can Debt Collectors Take Stimulus Check Payments
Debt collectors may be able to take your stimulus check depending on the type of debt you have.
While the last stimulus check was protected from garnishment by debt collectors, the 2021 Economic Impact Payment doesnt have the same protections.
Unfortunately, this lack of protection could severely impact those who need it most. There are ongoing efforts to close this loophole letters to Congress members and offices but for now, those who may be impacted should prepare.
Understanding The 2021 Economic Impact Payments
Stimulus checks will pay out $1,400 to individual taxpayers that earn under $75,000 annually, and $2,800 for joint filers making up to $150,000 annually plus an additional $1,400 for every dependent, contingent on the following:
- 2019 Taxes
- 2020 Taxes
- Number of dependants
- Amount you received in 1st and 2nd stimulus payments
- Your income level
- If you make more than $75,000 individually, but less than $80,000 individually, or more than $150,000 jointly, but less than $160,000 jointly, you may still be eligible for a phased out stimulus check.
For the latest updates on the third stimulus check and the 2021 Economic Impact Payments, visit the Get My Payment page on IRS.gov.
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About The Third Stimulus Payment
The third stimulus payment was available to people making under a certain income threshold in 2019 or 2020. They also received payments for their qualified dependents. Unlike the first two stimulus payments, the third payment included money for dependents over the age of 17.
The payments were available to individuals making up to $75,000 per year and married couples making up to $150,000 per year. Above those income levels, the payments slowly phased out.
People who fell under those income levels were eligible for a payment of $1,400 each plus equal payments for dependents. So, for example, a family of four claiming both kids as dependents and making less than $150,000 per year could receive $5,600 in payments.
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Child Support And Student Loans
As mentioned with tax debts, the IRS is also able to use your RRC to cover any unpaid child support and student loans.
“This approachforcing eligible individuals to forgo receiving an EIP that was exempt from offset if paid timelyis a problem the law and the IRS have created. With the change in the law made by the CCA, the rug is being pulled out from under eligible individuals with outstanding debts,” TAS argues.
Following discussions with TAS, the IRS was reported to be “looking into this issue and is exploring ways to exercise its discretion to help vulnerable taxpayers,” TAS said in late January.
The graphic below, produced by Statista, illustrates the composition of the $1.9 trillion stimulus package.
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Yes Your Third Check Might Be Seized To Pay Certain Debts Here’s Why
Under the bill governing the second stimulus check, your funds could not be garnished to pay debts like child support, banks or private creditors. However, part of this rule changed with the third check.
The bill authorizing the third payout was pushed through using a process called budget reconciliation. Congressional Democrats used this legislative tool to more quickly pass the new COVID-19 relief bill and the third stimulus check that comes with it, since it allowed them to pass it with fewer votes. But because this process was used, the third checks aren’t protected from all garnishment, although lawmakers are moving to fix this now.
There are three types of unpaid debt that could be paid through garnishment: unpaid IRS tax debt, other government debt like child support payments or private debt, according to Garrett Watson, a senior policy analyst at the Tax Foundation. Your third stimulus payment will be protected from outstanding tax debt and child support, but not from private debts, such as debt accrued due to a civil judgment, ranging from civil damages to consumer debt in default, Watson said.
Several banking groups sent a letter to Congress on March 9 asking lawmakers to pass stand-alone legislation to prevent the third check from being garnished for private debts.