Stimulus Checks: What Does It Mean For Your Bankruptcy?

Posted by Wesley Scott on April 19, 2020 at 2:23 PM
Wesley Scott

The CARES Act passed last week by Congress authorized stimulus checks based on income for most Americans.

Single adults who have an adjusted gross income of $75,000 or less would get the full amount. Married couples with no children earning $150,000 or less would receive a total of $2,400. Children under 16 years old will receive $500 each.

You can calculate out how much you are set to receive here: Washington Post Calculator

This is calculated out based on your adjusted gross income from your 2019 tax returns. If you have not filed your 2019 tax returns, then it will be based on your adjusted income from your 2018 tax returns.

You can find your adjusted gross income on Line 8b of the 2019 1040 federal tax return.

You can find your adjusted gross income on Line 7 of the 2018 1040 federal tax return.

The purpose of these funds is help Americans stay afloat during this uncertain time. For most debtors these funds will stay in your pocket and not be required to be lost to your bankruptcy trustee.

If you have already filed a chapter 7, when you receive the stimulus funds they are yours and you don’t need to turn over the money to the bankruptcy trustee.

If you haven’t filed a chapter 7 yet and receive the stimulus check, the funds are most likely still yours to keep in your bankruptcy. Though you will want to discuss this further with your attorney prior to filing as there may be certain exceptions to this.

If you are in a confirmed chapter 13 bankruptcy and receive the stimulus check, these funds are yours to keep, you don’t have to turn over the money to the bankruptcy trustee. This is not like the annual tax refund requirement.

One important thing to note, if you haven’t filed a bankruptcy yet and have judgments against you, the stimulus funds are most likely not protected from judgment creditors. Meaning prior to a bankruptcy these funds may be at risk of levy sitting in your bank account.

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