Some Stimulus Checks May Be in Danger of Garnishment by Debt Collectors

The $1.9 trillion American Recovery Plan Act of 2021 is finally heading to President Joe Biden’s desk for his signature, but advocacy groups are concerned that an obscure provision in the bill will allow debt collectors to garnish all or part of the $1,400 stimulus checks upon which millions of Americans are depending for short-term financial survival.

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Public debts, like back taxes and delinquent child support obligations, are protected from garnishment.

This is because “the $600 stimulus checks that went out in December had more robust protection that generally protected the money,” CNBC pointed out on Wednesday shortly before the House of Representatives passed the bill along party lines.

But private arrears – past-due credit cards, payday loans, personal loans, rent, mortgages, or car payments, to name a few – are still in danger of being taken by creditors that are aggressive enough to pursue them.

CNBC noted that there is an effort among lenders to put a pause on that harmful practice:

Consumer and banking trade groups, including the American Bankers Association, sent a letter to Congressional and Senate leaders on Monday calling for the stimulus payments to be exempt from garnishment.

‘Otherwise, the families that most need this money — those struggling with debt and whose entire bank accounts may be frozen by garnishment orders — will not be able to access their funds,’ the letter said.

The groups call on Congress to pass a standalone bill to prevent depository institutions from having to pay creditors who attempt to garnish and freeze bank accounts.

Wage and bank account garnishments require a court order signed by a judge, and consumers who have outstanding debts should never ignore collection warnings. Creditors – including the Internal Revenue Service – are usually willing to work with their customers to avoid, or at least postpone, legal entanglements.

The Federal Trade Commission (FTC) has resources available for people who are struggling to make ends meet.

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