Can your Stimulus Payments Be Garnished?
Depending on the circumstance, yes, a stimulus payment could be garnished. There are is a loophole in the CARES Act that could allow banks to seize stimulus funds from a recipient’s account for other reasons than those specified as valid for garnishment. In some states, including Nevada have taken temporary steps to prohibit many types of wage garnishment and writs during the COVID-19 pandemic.
When Can a Stimulus Payment Be Garnished?
Under the CARES Act, protections were put in place to protect delinquent taxpayers with unpaid taxes and delinquent borrowers with federal student loans from having their stimulus payments garnished. However, loopholes in the Act did not prevent private lenders, debt collectors, or creditors from trying to seize debtor’s bank accounts in advance of the money arriving. In some instances, banks attempted to see the payments to satisfy unpaid banking fees like overdraft fees.
Garnishments of stimulus payments that are still permitted include debts incurred from:
- Child support payments
- Alimony payments
- Money owed to crime victims
Debtors who are currently in a bankruptcy repayment plan or who have filed for bankruptcy are not required to claim their stimulus payment as income under the CARES Act.
Protections for Nevada Residents
Governor Steve Sisolak signed an emergency directive that prohibits several types of wage garnishments or writs of execution to help ensure financial stability for Nevada residents during the COVID-19 crisis. This included the garnishment of federal stimulus payments.
In signing this measure, Sisolak said:
During this period of economic uncertainty and hardship, this is not the time to create additional financial stress on Nevadans who are struggling to make ends meet. This measure ensures that federal stimulus money intended to help Nevada’s families and individuals actually stays in their pockets.
Sisolak’s directive orders that any funds or property garnished after the directive came into effect must be “immediately returned” to the debtor. This includes stimulus payments that were seized.
What Steps Should Debtors Take Now?
Once the Governor’s directive is lifted, garnishments and bank seizures can start back up. The directive does encourage borrowers and debtors to negotiate payment plans with lenders and creditors within 30 days after Nevada’s state of emergency and garnishment protections are lifted.
Those who may find themselves in financial trouble once COVID-19 financial protections are lifted may want to consider their debt repayment options. Bankruptcy may be an option to prevent future collection efforts, including wage garnishments and seizures of bank accounts.