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CAN CREDITORS GARNISH MY STIMULUS CHECK?

This post was written at 11:15 am on Thursday, April 16, 2020. We believe that it was accurate and up to date as of that time. However, because of the rapid, daily changes in the political and legal climates, we cannot guarantee that the post is current. 

Pursuant to the $2.2 trillion CARES Act, the federal government will issue stimulus checks to millions of income-qualified Americans. According to the IRS Economic Impact Payment Information Center, U.S. residents will receive an Economic Impact Payment of $1,200 for individual or head of household filers, and $2,400 for those who are married filing jointly, if they are not a dependent of another taxpayer and have a work eligible Social Security number with adjusted gross income up to $75,000 for individuals, $112,500 for head of household filers, or $150,000 for married couples filing joint returns, plus $500 per qualifying child. U.S. residents will receive a reduced payment if their AGI is between $75,000 and $99,000 if their filing status was single or married filing separately, 112,500 and $136,500 for head of household, or $150,000 and $198,000 if their filing status was married filing jointly.

As of April 16, 2020, it is widely reported that over 80 million stimulus checks have been processed and should arrive this week. For those whose information isn’t on file with the IRS, they can submit their details here and here. However, if you have had a judgment entered against you, read on for guidance on what type of information you should provide to the IRS.

Now, as Covid-19 shelter in place orders and the Coronavirus in general have left 22 million Americans out of work, many fear that debt collectors and creditors will garnish these funds before they can provide the intended relief and economic stimulus. The CARES Act protects those stimulus checks from offsets to collect certain debts owed to federal and state governments. The Act does not specifically address garnishment or bank offset for other debts. However, it gives the U.S. Treasury the authority to issue rules and guidance to carry out the purposes of the stimulus payments. So far, the U.S. Treasury has not elected to do so to protect your stimulus funds from private-creditor garnishment.

So, what can you do to keep your $1,200 stimulus payment out of the hands of Capital One, Bank of America, Wells Fargo, or other creditors instead of your Grocery Store, Home Depot, or Lowes? There is no perfect answer to that question. The National Consumer Law Center recommends that unless and until the U.S. Treasury ensures that the payments will be protected, consumers who have an outstanding judgment entered against them in a collection lawsuit should consider:

  • Withholding direct deposit information from the IRS (where it does not already have such information) so that the IRS will have to issue a paper stimulus check;
  • Withdrawing stimulus funds as soon as deposited;
  • Asserting exemptions under state law if an account containing the stimulus check has already been garnished; or
  • Seeking an emergency stay of any garnishment order.

In Georgia, the Attorney General is required to maintain a list of exemptions. By way of example, exemptions include retirement or pension funds, insurance annuities, child support, Federal student loan funds, or joint account funds, under certain circumstance, and others. While the specific funds from the stimulus have not been deemed exempt from garnishment, other funds in your account may be.

Regarding an emergency stay of a garnishment order, courts are currently open to address essential functions, and have been ordered by Georgia Supreme Court Chief Justice Harold D. Melton in his March 14, 2020 Statewide Judicial Emergency Order to “give priority to matters necessary to protect health, safety, and liberty of individuals.” On April 6, 2020, the order was extended through May 14, 2020. Arguably, an emergency stay to a garnishment order falls under that provision because the purpose of the CARES Act is “[t]o provide emergency assistance and health care response for individuals, families, and businesses affected by the 2020 coronavirus pandemic.” However, that route may not be necessary.

Justice Melton’s emergency order suspends, tolls, extends, and otherwise grants relief from any deadlines or other time schedules or filing requirements imposed by otherwise applicable statutes, rules, regulations, or court orders. Thus, a garnishment order, which by operation of statute goes into effect upon the service of the garnishment requiring your bank to pay funds into a court, should be treated as stayed until May 14, 2020. How your bank will interpret all of this comes down to their reading of the Statewide Judicial Emergency Order in relation to the garnishment statute. It may be necessary to seek an order from the judge stating that the stay applies and funds are not to be frozen because the order is stayed. This too will come down to a question of interpretation.

Other considerations are whether the judgment on which a garnishment is based is even valid. For instance, this Firm has had success in fighting garnishments where service of the underlying lawsuit in order to obtain default judgment was not properly completed. For instance, in Henry County State Court action Michelle Kunder v. LVNV Funding, LLC, Civil Action No. 19-SV-1823 (2019), the Court held that where “[t]here is no return of service within the original Magistrate Court file”, LVNV Funding, LLC did not have “a prima facie case regarding service being perfected” so the judgment against our client was vacated. Once the underlying judgment is gone, a garnishment cannot move forward.

We are available for a consult to answer any questions that you may have regarding garnishments or any other matter related to Covid-19 legal concerns or otherwise.

We are making this post to inform as much as possible. It is not our intent to give legal advice or to create an attorney/client relationship. If you need legal advice, please consult an attorney. If you have questions about your particular situation, please gives us a call, send us an email, or request a video conference. We’ll be happy to assist.