$1,400 stimulus checks could be garnished. Some lawmakers are pushing to change that

  • As millions of$1,400 stimulus checks are deployed, some people with unpaid debts could have the federal payments taken from their accounts.
  • The American Rescue Plan did not protect the money from garnishment to satisfy private debts.
  • Now, some Capitol Hill leaders want to change that. In the meantime, there are steps you can take to track where your stimulus money stands.

As the government pushes millions of $1,400 stimulus checks out the door, some Americans could come up empty handed.

The reason: overdue unpaid debts.

The issue prompted Capitol Hill lawmakers to enter into a crossfire of sorts on Thursday over whether or not those checks can be garnished, as some looked to change the policy.

That's after the Treasury Department and IRS announced on Wednesday that 90 million checks have gone out thus far by direct deposit.

More from Personal Finance:
The IRS has issued more than 42.5 million refunds this tax season
How to cut your income to grab the $10,200 unemployment tax break
Struggling households would put off paying these bills if necessary

"We know predatory debt collectors are already lining up to try to take a cut of those checks," Sen. Sherrod Brown, D-Ohio, said on the Senate floor on Thursday.

To remedy that, Brown called for the passage of a bill he proposed alongside fellow Democrats Sen. Ron Wyden of Oregon, Sen. Bob Menendez of New Jersey and Sen. Chris Van Hollen of Maryland.

However, efforts to pass that legislation were blocked by Sen. Pat Toomey, R-Pa.

Toomey argued that it was too late the change the legislation, and that altering the rules could protect husbands or fathers who refuse to pay alimony or child support.

Under the terms of the American Rescue Plan, the money cannot be garnished for unpaid federal debts or back taxes.

But the $1,400 stimulus checks can be garnished for unpaid private debts, such as medical bills or credit card debts, provided they are subject to a court order, according to Christine Hines, legislative director at the National Association of Consumer Advocates.

Garnishment is a court order that allows for funds to be removed from someone's account.

If banks have a court order seeking funds, they generally have to comply, Hines said, though they can take steps to mitigate overdraft or other fees that account holders pay.

Still, a group of banking and consumer organizations, including the American Bankers Association, sent a letter to Congress earlier this month urging them to "quickly pass standalone legislation addressing garnishment to ensure that American families will receive these benefits as intended."

This week, the Consumer Financial Protection Bureau also said it is concerned that the stimulus payments will be taken from financially vulnerable Americans due to past-due debts, overdraft fees or other liabilities.

"If payments are seized, many financial institutions have pledged to promptly restore the funds to the people who should receive them," CFPB Acting Director Dave Uejio said in a statement.

"We appreciate these efforts, which recognize the extraordinary nature of this crisis and the extraordinary financial challenges facing so many families across the country," he said.

Still, some payments could already be subject to garnishment.

"It depends on how fast they move," Hines said, of creditors.

If you think your payment could have been taken, your bank account would be the first place to look, she said. Your may also want to contact your financial institution for more information.

It also helps to track when your stimulus payment is scheduled to be delivered by using the IRS Get My Payment site.

Ultimately, stimulus checks are a government benefit, and should be exempt from garnishment, Hines said.

"We still need Congress and Treasury to work together to protect the stimulus payments," Hines said. "I don't think it's too late."

Source: Read Full Article