States prevent money from being garnished

The new $ 1,400 stimulus controls are intended to help millions of Americans overcome the financial hardships of the Covid-19 pandemic.

However, the legislation that authorized these payments has a big caveat: the funds could be garnished by outstanding debts.

This goes for private debts, such as medical or credit card debts, which are subject to a court order.

The American Rescue Plan Act, which was passed through a process called budget reconciliation, did not protect stimulus controls from confiscation.

More information on personal finance:
Checking for fewer stimuli than expected? How the IRS will let you know
How to manage an inherited 401 (k) or IRA
People weigh the “revenge expense” with a $ 1,400 stimulus check

Democrat Sensor Sherrod Brown of Ohio, Ron Wyden of Oregon, Bob Menendez of New Jersey, and Chris Van Hollen of Maryland have tabled a proposal to protect stimulus payments from private debt collectors.

But Senate Republicans closed efforts to move forward on this bill last month.

“Senator Brown will continue to look for ways to ensure that federal payments go to American families and not to debt collectors,” the lawmaker’s office said.

Meanwhile, some states have stepped up to protect payments. The efforts are similar to those made last year, when the first $ 1,200 stimulus checks were also subject to foreclosure. (The $ 600 stimulus checks that were passed by Congress in December were generally exempt).

Here is a working list of states that have taken action so far.

The Colorado legislature protected previous stimulus controls against confiscation.

However, this does not apply to the new $ 1,400 stimulus controls.

“We are currently working on another bill to increase general protections against embargoes that will help protect new stimulus controls,” said Lawrence Pacheco, communications director for the Colorado Attorney General’s Office.

Massachusetts Attorney General Maura Healey issued guidelines in March that made $ 1,400 stimulus checks exempt from confiscation or forfeiture under state law.

“These stimulus payments should go directly to help people and families with problems pay for housing, food, utilities and other basic needs, and not in the hands of debt collectors,” Healey said in a statement.

However, the guidelines do not apply to actions by the Massachusetts Department of Revenue, including those related to child support for overdue minors.

In January, Minnesota Gov. Tim Walz, a Democrat, amended and expanded an executive order that classifies money as “needs-based government assistance,” which is still in effect.

Stimulus funds are exempt from being charged at least six months after they are received, according to the Minnesota Attorney General’s office.

Nebraska Attorney General Doug Peterson released an announcement in March clarifying that $ 1,400 stimulus controls may be exempt from confiscation, forfeiture or execution for some low-income people.

“Nebraska law exempts certain proceeds and property from foreclosure and foreclosure by creditors and debt collectors,” the announcement states. “The purpose of these exemptions is to ensure that individuals have enough income and assets to provide for basic needs such as housing, food and utilities.”

New Jersey Gov. Phil Murphy, a Democrat, announced in March that some state financial institutions had agreed to protect the $ 1,400 checks.

“We want residents who have received their federal incentive funds to use them as they see fit,” Murphy said in a statement. “I am pleased that 50 banks and credit unions have signed our agreement to protect these federal payments that New Jerseyers receive from not being garnished by past debts or overdue accounts.”

The protection has a minimum duration of 30 days once the funds are deposited in the consumer’s account.

New York Attorney General Letitia James issued guidelines in March to prevent debt collectors from seizing payments of $ 1,400.

“These official guidelines make it clear that banks and debt collectors cannot freeze or seize stimulus funds for New Yorkers, especially those who need it most during this time,” James said in a statement. “My office remains committed to protecting the rights of New Yorkers and ensuring that any institution that violates this guidance will be held accountable to the fullest extent of the law.”

In addition to confiscation, the guide also applies to offsets, whereby money from accounts is used to pay off debts to banks.

However, the guidelines do not apply to actions taken by New York State, such as efforts to collect an overdue alimony.

Oregon continues to protect stimulus controls from confiscation after the Oregon legislature passed a law in an emergency session, according to Oregon Attorney General’s spokeswoman Ellen Rosenblum.

In addition, Oregon’s child support program will not garner stimulus controls from financial institutions, the spokeswoman said.

Rhode Island Attorney General Peter F. Neronha recently issued guidelines stating that $ 1,400 stimulus checks are protected against confiscation or foreclosure of debt collectors.

“These payments are a lifeline for so many Rhode Island families who have been devastated by the pandemic,” Neronha said in a statement. “They belong to the recipients and are not a fair game for debt collectors.”

In addition, the attorney general’s office will take action to enforce the law if a creditor tries to seize a stimulus payment.

Virginia Attorney General Mark R. Herring last week announced an amendment to a law to protect $ 1,400 stimulus checks from debt collectors.

The law was initially passed last year to protect $ 1,200 CARES Act shipments.

The amendment “ensures that Virginians can keep all of their federal stimulus payments, protecting that money from debt collectors and creditors,” according to the announcement.

In March, Washington Gov. Jay Inslee, a Democrat, updated a proclamation on consumer debt embargoes with a new language to include “federal payments of any kind issued in response to the Covid-19 pandemic,” which applies to stimulus payments of $ 1,400.

“Your stimulus control should help pay for needs, such as food and rent,” Washington Attorney General Bob Ferguson said in a statement. “You don’t have to be dressed to pay for medical bills.

“If consumer debt collectors are looking for your stimulus, please contact my office.”

This article may be updated as new information develops. Please check for updates again.

Have you struggled to get your $ 1,400 stimulus due to outstanding debts and are you willing to share your story? e-mail [email protected].