Two months after President Joe Biden first proposed his sweeping, $1.9 trillion coronavirus stimulus plan that’s loaded with features that will directly benefit Americans — like $1,400 stimulus checks — those first payments are expected to start showing up as direct deposits in bank accounts as soon as this weekend, now that the bill has been signed into law.
Some recipients, however, might be in for a rude surprise. Unfortunately, a new stimulus check update we’ve learned about reveals that some people’s check could be seized before it even makes it to their bank account or mailbox. That’s because of the special legislative process Democrats had to use to pass the bill, knowing that it wouldn’t have any Republican support.
According to a Fox Business report, debt collectors will be able to garnish payments from this new round of stimulus checks — which was not the case with the first two emergency stimulus payments under President Trump. Both of those previous payments were off-limits to creditors and exempt from garnishment, per the report. And at least one US Senator is already working on legislation to close this loophole.
“The economic impact payments are intended to help families purchase food and other necessities to make ends meet,” a coalition including the American Bankers Association wrote in a letter to congressional leaders earlier this week. “Many people were already struggling prior to the coronavirus crisis, and millions have now been laid off or had their hours cut.”
Democratic Senator Ron Wyden of Oregon has said he intends to introduce a separate bill that would put the stimulus money out of reach of creditors. The kind of debt that can typically be taken care of by garnishment includes IRS back taxes, as well as other government debt — but also debts to private collectors. The new stimulus checks are apparently safe from being garnished to satisfy debts like back taxes, but not private debts.
“While Democrats intend to protect the third payment from private debt collectors, Senate rules did not allow us to include that protection in the American Rescue Plan,” Wyden said in a statement released this week. “I will be introducing standalone legislation to ensure families receive their much-needed relief payments.”
With the first stimulus payments passed in March of 2020 as part of the CARES Act, creditors weren’t barred from garnishing any of that money at the outset, but states and local governments passed measures after the fact to keep creditors away from those stimulus checks. And then, when Congress passed the $900 billion stimulus package in December, congressional leaders did add a provision making the stimulus checks unable to be garnished.
As a reminder, the stimulus checks this time around will be the largest to-date. Taxpayers earning up to $75,000 are eligible to get $1,400, while couples who make up to $150,000 together will get a single check for $2,800. An additional $1,400 will go to families for each eligible dependent child they claimed on their most recent tax filing.
