Can Bill Collectors Take Your Stimulus Check?

Your COVID-19 Stimulus check can be taken by creditors! Act now to protect it!

Everyone is looking forward to the next round of stimulus relief checks -- including creditors.

You need to know that your $1,400 stimulus check coming under the third round of direct COVID-relief payments could be taken by your creditors in cases where judgments have been entered against you in state or federal court.

If you have been sued in the past and a judgment was issued by a court, the judgment creditor can garnish funds in your checking account and this includes the stimulus check. The stimulus bill provides no protection from your creditors, and your stimulus check could be at risk once it is deposited into your checking account.

Many consumer protection groups are asking Congress for additional protection, but until that comes, if ever, there are steps you can take to protect your COVID relief stimulus check.

How to protect your second stimulus check

Utah state law doesn’t protect the stimulus payment from garnishment. To be cautious, immediately withdraw the stimulus check funds (and all of your money if you have an outstanding judgment), and deposit the funds into an account which does not bear your name. A judgment creditor can garnish any account you own, including joint accounts. Ownership is established by your name on the account. Once money is deposited, all of it belongs fully and equally to each account holder regardless of the source of the money.

In general, if you have a judgment against you, you should not hold funds in any account with your name on it until you decide to file for bankruptcy relief or work out a payment arrangement with the judgment creditor so you avoid having your entire account balance erased by a garnishment. Even if the money is not yours or exempt from garnishment (e.g. SSA benefits), the bank could freeze the account and you would need to go to court to show that the money isn’t yours or is exempt from collection to prevent the creditor from taking it to pay your judgment.

The second COVID stimulus check is meant to address the pandemic emergency, substitute for lost future income, and pay living expenses. The money was not intended to be used to pay old debts or to satisfy old judgments. However, Congressional intent for the purpose of the stimulus funds won’t stop creditors from trying to take your second COVID relief stimulus check.

Even though collection agencies try to scare you with threats of garnishment, remember that without a judgment entered by a court, a creditor cannot garnish your bank account. They first have to file a complaint, attempt to provide you with personal service of the complaint and summons and win (either by default if you don’t answer the complaint or at trial), and get a judgment before they can garnish any money, including the COVID stimulus money. Only a creditor who has lawfully obtained a judgment may collect the judgment by issuing a writ of garnishment.

If you have more questions about your stimulus check and filing for bankruptcy relief, contact my office.

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About Marji Hanson

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My law practice focuses exclusively on consumer bankruptcy law. I can help you decide if bankruptcy will solve your problems and which program, Chapter 7 or Chapter 13, is best suited to meet your financial needs. I have learned about the bankruptcy system in the District of Utah from the inside out.

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