Are Your Stimulus Checks Safe?

As the pandemic continues, the number of bankruptcy filings will inevitably continue to jump during the year. This is primarily due to the economic uncertainty, especially as several states consider rolling back re-opening, or instituting a new series of lockdown orders. 

Even if the government reaction to the economic crisis has been slow, lawmakers have learned from the mistakes they made in 2008 and 2009. For starters, the CARES Act included stipulations to help homeowners to get a forbearance on their home mortgage and a temporary increase in unemployment benefits in addition to a one-time stimulus check.

Given that the stimulus is literally pennies from heaven, some have expressed concern as to whether this money can be garnished. The full answer is no and yes, but when it comes to filing bankruptcy, your check is safe.

This is important as parents across the country are using this money to help pay for the essentials such as food, rent, utilities, and even medical bills. Granted, the one-time has probably been spent already, but if you were lucky enough to save the money, then you want to make sure it is safe as, in this time of uncertainty, the money can go a long way to help protect your family.

According to statistics from them American Bankruptcy Institute, nearly 720,000 consumers filed for bankruptcy protection in 2019, and given the current state of the economy, that number is expected to climb this year. If past economic crises are any indication, the number of new bankruptcy filings could go up by more than 30 percent.

Regarding the impact of past or future, stimulus checks, the Justice Department has issued a notice notifying the courts that stimulus checks cannot be considered when considering a claimant's assets or monthly income. This means that recipients will not be forced to repay the amount they receive from the government.

While there are rare exceptions, this rule will hold for the vast majority of those filing for bankruptcy protection. But even in these cases, there is a process to gain approval for the plan to include stimulus payments in the pool of assets used to repay debt.

Remember, if you are considering bankruptcy, then you might want to talk to a law firm in your area that can help you and your family navigate this process. According to Jacobson, Julius & Harshberger, this includes finding a lawyer who can help "assess your financial picture and offer dependable information about bankruptcy and various alternatives, including loan modifications." 

If you are in Pennsylvania, then you can find out more about their approach to this process at https://www.ljacobsonlaw.com/pa/harrisburg-bankruptcy-attorney/.

This coverage extended to the past due to taxes as the CARES Act stipulates that the IRS cannot seize the funds. This is good news, as it is estimated that nearly 15 million people owe the government money. As such, the added protection will not help you to get out of debt, but it also means that you will not have to turn around and send the check right back to the government.

Beyond bankruptcy and past-due taxes, your student loan lender cannot attach your stimulus check either. This includes federal student loans in default as these loans have been suspended without interest accrual until the end of September. Depending on how long the current crisis continues, the deadline might even be extended.

But just because your stimulus payments cannot be garnished from bankruptcy, past-due taxes, and student loans, does not mean that your checks are wholly protected.  Given the impact on your family's finances, you want to make sure that you keep this in mind when planning how to allocate the money you received.

As such, you will want to check if you have any private debts which are currently in collection or have wage garnishment judgments against you. Also, if you are divorced and your ex is behind on child support, then there might be an opportunity for you and your family to get what you are owed.

This is important as the CARES Act specifically mentions the need for this money to go for child support via the Treasury Offset Program (TOP). Without going into the minutia of the law, the critical point is that the money is meant to help you and your family.

Just keep in mind that if you or your spouse has dealt with a divorce are filing jointly, and owe child support, then your family is receiving could be garnished. 

If you are not sure how this will impact your family, then the best thing you can do is seek out professional advice as this might be the best way to make sure your family does not get shorted shifted by this unprecedented stimulus payment.