Stimulus payments: debt collectors can seize new stimulus checks. Lawmakers are trying to fix this

Stimulus payments: debt collectors can seize new stimulus checks. Lawmakers are trying to fix this

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Recipients with a credit card or unpaid medical bills, for which a company has obtained a judgment against the debtor, can see the new infusion withdrawn from their bank accounts, potentially preventing the needy from receiving emergency money.

Senator Ron Wyden, a Democrat from Oregon, plans to introduce a correction to protect attachment payments earlier this week, according to a spokeswoman.

But for now, it is possible that collectors can confiscate the money, up to $ 1,400 per person, that the federal government is depositing directly into people’s bank accounts.

“We would very much like it to have passed before the money started to come out. Protection would have been much more effective if the payment had been encrypted so that banks would automatically know how to protect the money,” said National Consumer Law Center associate director Lauren Saunders.

Why the change

Lawmakers protected the $ 600 payments that were approved as part of the December stimulus, but Covid’s latest relief bill did not include that protection because of the procedural rules that Democrats used to pass the bill in the Senate, where none Republican signed it.

The relief bill passed last March, known as the CARES Act, also did not include text protecting the first round of stimulus payments, worth up to $ 1,200, from private debt collectors. An autonomous Senate bill that would have protected payments was approved by unanimous consent a few months later, but was not approved by the House.

A coalition of advocacy groups, ranging from the National Consumer Law Center to the American Bankers Association, is asking lawmakers to make the correction.

“Otherwise, the families who need this money most – those struggling with debt and whose entire bank accounts can be frozen by pledge orders – will not be able to access their funds,” the group wrote in a letter sent to Congressional leaders.

If the creditor has processed the debt and there is a court order in effect for the pledge, the bank must return the money by law, unless Wyden’s proposed bill is approved.

Who is entitled to a check for $ 1,400?

The third round of payments is expected to reach about 85% of households, according to the White House. Those whose bank information is filed with the IRS are likely to receive the money first, because it will be deposited directly into their accounts. Others may receive paper checks or prepaid debit cards in the mail.

What will be your stimulus check?

Direct deposits started to come out this weekend and additional batches of payments will be made in the coming weeks.

Families will receive an additional US $ 1,400 per dependent, so a couple with two children can receive up to US $ 5,600. Unlike previous rounds, families will now receive additional money for adult dependents over 17.

The total amount goes to individuals who earn less than $ 75,000 of adjusted gross income, heads of household (such as single parents) who earn less than $ 112,500 and married couples who earn less than $ 150,000. But then payments gradually decrease as revenue increases.

Lawmakers have narrowed the scope of payments this time so that not everyone who received a previous check will receive it now. It cuts individuals who earn at least $ 80,000 a year in adjusted gross income, heads of households who earn at least $ 120,000, and couples who earn at least $ 160,000 – regardless of how many children they have.

Payments are protected from other debts

The law protects stimulus payments from pledging other pending federal debts, such as student loans or tax debts.

For the $ 1,200 payments authorized under the CARES Act last year, the payment was protected from all debts except defaulting child support. Congress extended the exclusion for the second round of payments, up to $ 600, ensuring that the money was not compensated even for the alimony due.
Some struggling Americans are not receiving the stimulus payments they were promised. Here's why
But there is another obstacle for people who were eligible, but missed receiving their previous payments. It is estimated that 8 million families did not receive the money sent directly to them, most commonly because the IRS did not have their correct information on file. Normally, very low-income people are not required to file taxes.

These people can claim payment as a credit on their 2020 tax return. But none of Covid’s three relief bills protect these tax credits from arrears – even federal ones.

An IRS spokesman told CNN last week that the agency is reviewing what may be possible to resolve the problem. However, the people who filed their 2020 tax returns may have already lost the money and will not be able to get it back.

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