In March of this year, Congress passed the CARES Act as a result of the Covid-19 outbreak. As you may already know, included in the CARES Act were stimulus checks to individuals and families that qualified based on certain income limitations. Qualified individuals received up to $1,200 each plus $500 per child. Many Kain & Scott clients worried that their creditors would be able to levy the stimulus checks before they received the money. Mostly, clients worried about the IRS or Minnesota Revenue taking the funds to pay for any tax debt they may have. The good news is that Congress made sure to protect the stimulus checks from most creditors, including all tax agencies. That means, not even the IRS could take a stimulus check from someone.
For anyone in an active bankruptcy, the Chapter 7 and Chapter 13 trustees could not touch the stimulus checks, for they were also excluded from the bankruptcy code’s reach.
That being said, there is one type of debt that could levy the stimulus checks: child support arrears. If one was behind on child support payments, Minnesota’s child support collection agency could collect the stimulus checks to pay down the arrears.
Also, once the funds were deposited into ones bank account, a creditor with a judgment could levy the bank account, including any stimulus check funds included in there.
As I write this, Congress is working on approving a second Covid-19 relief package that may or may not include additional stimulus checks. It is safe to assume that a second round of stimulus checks would also include the same protections from creditors. You can breathe a sigh of relief that if you qualify for a stimulus check, your creditors won’t be able to touch it. BUT, if you owe child support arrears, you can expect Minnesota Child Support to take the funds. In addition, if you have an active judgment against you, the judgment creditor could always levy your bank account with the funds in it.
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If you are worried about a judgment creditor levying your bank accounts, we recommend scheduling a consultation with Kain & Scott to discuss whether bankruptcy is a smart option for you. When the time is right, or when you are ready, reach out to www.kainscott.com. You will be so glad you did!
