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Stimulus Money & Social Security Benefits Could be Taken from Your Bank Account!


The way things are moving so quickly some of this information could change tomorrow!

I hate typing-Please forgive the typos. When I went to school (the 50s-60s and 70s) only females took typing or the guys smart enough to know that's where the girls were. I was neither! And no this isn't sexist, it's simply a statement of fact.

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The CARES Act authorizes payments up to $1200 to individuals and $2400 for couples, with an additional $500 for children under 17 years old. The payments phase out for those whose income is between $75,000 and $99,000 ($150,000/$198,000 for a married couple filing jointly). An eligible family of four with children under 17 will receive $3400. Social Security recipients who do not file tax returns will only receive $1200 as the IRS does not know which recipients have dependents. It is unclear whether recipients will have an opportunity to provide information regarding the number of dependents you have in order to obtain a higher payment.

The U.S. Treasury will start issuing stimulus payments as early as April 9th to income-qualified Americans. Payments will first be made electronically to individuals who provided direct deposit information in their 2018 or 2019 tax returns. Social Security recipients and railroad retirees who are not required to file a tax return and did not file a return for 2018 and 2019 will receive stimulus payments in the same way they receive those benefits—in almost all cases either through direct deposit to their bank account or loaded onto their Direct Express prepaid card.

More information on payment plans and eligibility criteria is available and is being regularly updated at (If you can't click this then copy and paste it into your address bar)>

The Threat to Families’ Stimulus Checks

Certain creditors may view stimulus payments as an opportunity to seize money for amounts owed on outstanding court judgments. Millions of Americans have court judgments against them—often issued many years ago by default without the consumer’s knowledge. These consumers may not realize that they are potentially subject to bank account seizures, including the immediate loss of a stimulus payment.

Creditors may be lining up to obtain court garnishment orders to seize stimulus deposits and any other amounts present in the bank account, up to the amount of the garnishment order. In some states, a previous garnishment order may still be in effect that obligates the bank to review the account for a period of time. Unless the federal government, state governments, or the courts direct otherwise banks that are presented with a garnishment order are likely to freeze amounts in the account and give the consumer a short time to prove in court that account funds are exempt from seizure—a daunting prospect at any time, and a near impossibility today when many courts are at least physically closed, people are ordered to stay at home, and attorneys are inaccessible.

For most consumers, there is no magic bullet to avoid bank account seizures. Many approaches to minimize such seizures have drawbacks that are better to avoid if payments are not actually at risk of being seized. These are complex issues that consumers may not want to make on their own.

Are There Special Limits on Judgment Creditors’ Garnishment of Stimulus Payments?

The CARES Act protects stimulus checks from being taken to collect debts owed to federal and state governments. The Act does not address private creditors’ seizure of the checks from bank accounts to satisfy outstanding court judgments. While advocacy efforts are ongoing to change that situation, this article assumes that they will not be successful, at least before the first set of payments is distributed.

Consumers may have protections they can, in theory, invoke under state law, after they receive notice that their bank account has been frozen. Depending on the state, consumers can claim funds in the account are exempt, for example under exemptions for “public benefits,” deposits up to a certain dollar amount, or a “wild card” dollar amount.

But in a frustrating situation with constitutional due process implications, with courts closed to most business and consumers unable to reach the courts in any event, consumers may not have an opportunity to object to money being taken by raising these rights.

In a few instances, state or local governments have issued emergency orders to stop all or some garnishment orders and are considering orders to declare stimulus payments as exempt which would be an important way to protect consumers if other states follow their lead. Orders are being issued and changed on a day-by-day basis. Calling a bank now or in the foreseeable future may be useless. I would physically visit a local branch the day you find out someone has put a hold on your account.

Determining If a Bank Account Is Subject to Garnishment

Many Americans don't know their bank account is at risk of seizure because they don't realize a default judgment has been granted against them in a collection lawsuit. Even where a consumer’s creditor is announcing debtor-friendly policies because of the COVID-19 epidemic, the creditor may have already sold its rights to the debt to a debt buyer. A debt buyer is unlikely to be so considerate. Here are clues to tell if a stimulus payment might be garnished:

  • Has your bank account anywhere or wages ever been garnished? Consumers are supposed to receive notice after a garnishment has paid off a debt. If a previous garnishment didn't satisfy the judgment, any bank account at any institution may be at risk for additional seizures?

  • Have you ever lost a lawsuit or had a judgment entered against you?

  • Have you ever been served legal papers relating to a suit, but you didn't respond?

  • Remember credit reporting agencies no longer include information about judgments. So even if your credit report doesn't show a judgment that doesn't mean one doesn't exist.

  • It will be difficult and maybe even impossible right now to go to a courthouse where you can check to see if there are any judgments against you. But you can usually go online and access your local court documents. Documents are normally kept at the County Recorders Office. Google your county name and the words "Recorders Office". Again, the official website for your county will be a (dot gov) as in> .gov site.



Strategies for At-Risk Direct Deposit Recipients

Those receiving stimulus payments by direct deposit could receive them as soon as April 9th. How soon this money can be seized by a judgment creditor depends on the state law where the consumer lives or banks, or if the bank is out-of-state or a virtual or online bank, where the bank is located. Either could apply.

Immediate garnishment may occur as soon as April 9th where state law allows a garnishment order already delivered to the consumer’s bank before the direct deposit to remain effective on a continuing basis through the date of direct deposit. But hopefully, if you know about a garnishment that's already in effect YOU CHANGED BANKS! Only a few states allow continuing garnishment orders. Pre-existing garnishment orders may have a continuing life for a certain number of days but have expired prior to April 9th, requiring the creditor to obtain a new order. AGAIN, if the bank told you about an attachment on your account YOU HAVE CHANGED BANKS... right!

It is possible that creditors may have obtained new garnishment orders that they have not yet served. We have heard some reports that creditors are seeking such orders. It is unclear to what extent creditors are able to access the courts during this emergency to obtain these orders. Some courts may be open electronically but some may be fully or partially closed and not issuing garnishment orders or issuing them slowly. If a bank account is at risk of a new garnishment order that has not yet been served on the bank, the consumer has some time to move the stimulus payment out of the account to prevent seizure.

Starting April 9th, at-risk consumers should monitor their accounts and consider moving all money out shortly after it arrives (or even moving other money out earlier...CHANGE BANKS!) Consumers should consider withdrawing the funds in cash or transferring the funds electronically or through a debit card payment to pay for necessary goods or services. If it is safe to access an ATM, many banks are waiving their daily limits on ATM withdrawals.

Another option that may reduce but will not eliminate the risk of garnishment is to move existing funds and seek direct deposit of the stimulus payment into a prepaid card or bank account at a smaller bank or credit union. If the balance you owe is big enough judgment creditors will blanket all your local larger banks with garnishment orders hoping you bank with one of them. Creditors are less likely to serve garnishment orders on smaller institutions. Prepaid cards are not exempt from garnishment.

Whether to move funds from a bank account will be a difficult decision, and should be based on how real the risk of garnishment is if they are left in the account. Can you afford to lose the money in that account?

Some states have automatic stays against freezing bank accounts now. In some states, you need to take action to defend your money.

If there are exemptions that are not self-actuating and the account has been frozen pursuant to a garnishment order, you can seek the release of the exempt funds. The stimulus payments may be exempt because state law protects a certain dollar amount in the account or may exempt as “pubic benefits” or “public assistance benefits”.

Furthermore, if you know there's a judgment floating around out there, you should consider filing preemptive actions before a garnishment order is served, as a state’s procedures allowing the consumer to raise exemptions only immediately after a bank account is frozen should not apply during the COVID-19 emergency. Again calling a bank is basically useless right now. Even if you did get through on the phone the chances of getting anyone who would know what you're talking about is slim to none. You will probably want to go into the bank.

Special Strategy for At-Risk Social Security, SSI, and VA Beneficiaries

The protected amount in a consumer's account need not be traced to the federal benefits—that dollar amount is protected no matter its source. If two months of federal benefits for a Social Security recipient is $2000, their account will be fully protected from garnishment if let's say there is only $799.00 in the bank account before the stimulus payment is deposited. Once the $1200 is deposited, the total amount is less than $2000. Before the next Social Security or other benefit payment is deposited, however, they will need to withdraw additional amounts to keep the new balance under $2000. Fortunately, benefit payments come on a predictable date each month, such as the second Wednesday of the month.

Should Consumers Provide Their Direct Deposit Information to the IRS or Wait to Receive Stimulus Payments by Paper Check?

For many millions of Americans, the Treasury Department has no information on how to pay them electronically and will be sending a paper check unless the consumer provides their information via the new Treasury web portal. As described below, paper checks offer an opportunity to avoid garnishment. But, if Americans switch to direct deposit via the Treasury web portal, receipt of the stimulus payment will be sped up by weeks or even months. Paper checks also may be sent to the wrong address, lost, or stolen. Waiting months for payment, recipients may also be victimized by predatory lenders offering cash up front in return for the stimulus payment—with interest rates of a hundred percent or more.

Strategies to Avoid Garnishment for Those Receiving Paper Checks

If there is a risk of seizure, recipients of paper stimulus checks can avoid garnishment by cashing them and not depositing them into their bank accounts. The consumer’s bank may be willing to confirm that there is no garnishment order and cash the check immediately. Grocery stores or other merchants may accept the checks and provide cash-back that can be saved or loaded onto a prepaid card. Where a creditor knows the consumer’s regular bank account, the risks of garnishment can be reduced, but not eliminated by opening up a new account at a small local bank.

Friends or relatives may be willing to provide cash in return for endorsement of the check to them, but they may face significant problems depositing even an endorsed check into their account. Already banks are concerned about extensive fraud involving stimulus paper checks and will be very cautious about depositing them into someone else’s account. A bank may either refuse or request a hold on the funds in a friend’s account.

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