This week, many Americans received $1,200.00 (or more) in stimulus funds from the federal government as part of the CARES Act. If you have already filed your 2019 tax returns and provided the IRS with direct deposit information, the IRS sent (or will send) stimulus funds by direct deposit.
This method of getting funds to families is good, in theory, because it provides money to people in a fast, efficient manner. However, one of the unintended consequences is that direct-deposited funds then become immediately available for creditors to garnish. That happened because Congress did not include an “exemption” for those funds. Exemptions are a provision in a law stating that funds cannot be taken by creditors to pay debts. A simple example of funds that are generally “exempt” is social security.
It is no surprise that many families are struggling financially right now. Some people are in a position where a creditor has permission to either automatically withdrawal payment or garnish a bank account. That means that when the stimulus funds are deposited, the creditor can immediately take the funds and apply them to a debt owed by the account holder.
Payment of delinquent debts is not what Congress intended the stimulus to be used for. Instead, the funds were intended to help families pay ongoing living expenses while suffering the financial impact of the Coronavirus pandemic. Indeed, 25 states have issued a letter to the Treasury Department asking for direction on how to protect the stimulus funds from creditors. You can read that letter here.
Unfortunately, Arizona’s governor did not join in the request that the federal government provide protections for stimulus funds, and Arizona has not enacted any form of state protection or exemption for those stimulus funds.
If you are struggling with debt, you should consider immediately withdrawing the stimulus funds upon receipt so that a creditor cannot garnish them from your account. Additionally, consider consulting with an attorney regarding other actions you can take to ensure that your family’s finances remain protected. You can schedule a consultation with the Flagstaff Law Group to do so by calling 928-233-6800.
*Disclaimer: The information contained in this article is for informational purposes only and is not legal advice. Legal advice should take into account the specific facts of your situation. You should seek professional legal counsel before acting upon any of the information contained in this article.