Can My Stimulus Check Be Garnished for Credit Card Debt?

The American Rescue Plan Act is a federal law that was passed to help provide a third round of relief to Americans during the COVID-19 crisis. Like the two acts before it, the ARP Act included stimulus payments to many individuals and families. But those who are struggling with debt might wonder: Can my stimulus check be garnished for credit card debt or other money owed.

The short answer is yes, but it depends on the type of debt you’re dealing with. Find out more in the short guide below.

About the Third Stimulus Payment

The third stimulus payment was available to people making under a certain income threshold in 2019 or 2020. They also received payments for their qualified dependents. Unlike the first two stimulus payments, the third payment included money for dependents over the age of 17.

The payments were available to individuals making up to $75,000 per year and married couples making up to $150,000 per year. Above those income levels, the payments slowly phased out.

People who fell under those income levels were eligible for a payment of $1,400 each plus equal payments for dependents. So, for example, a family of four claiming both kids as dependents and making less than $150,000 per year could receive $5,600 in payments.

Who Can Take Your Stimulus Check?

With so much money on the table, you might wonder: Can debt collectors take your stimulus check. In some cases, the money you get from the third stimulus could be garnished. Learn more about individual situations below.  

Federal or State Tax Debt: No

Your stimulus payment will not be taken to offset past-due federal debts. That includes tax debt. It also won’t be taken to offset state debts, including tax debt.

Federal Student Loan Debt: No

Your stimulus payment won’t be used to offset student loan debt if it’s a federal loan. This is not necessarily true for private student loans, though.

Bankruptcy: Probably Not

If you’re in an existing bankruptcy, your stimulus payment will probably not be taken to help offset your debts. However, you might want to consult with your bankruptcy attorney about your individual case and whether stimulus money might be a factor.

Child Support: No

If the child support is a federal or state debt, stimulus money cannot be offset or garnished to cover it. However, this is only true if you receive the money upfront as a stimulus payment. If you don’t get the payment in 2021 and attempt to claim the related credit on your next tax return, any associated refund might be garnished. 

Credit Card Debt: Yes

The newest stimulus act does not include protections against private creditors and collectors. That means if you have credit card debt, your stimulus funds might be garnished.

It’s important to realize this doesn’t mean your credit card company can intercept the check or deposit. It simply means if there’s a levy or garnishment on your bank account and your stimulus funds go into that account, they can be used to offset that past due debt just like any other deposit into your account.

Delinquent Loan Debt: Yes

The same is true for any type of loan or other delinquent debt. If the creditor has gone through the process of suing you and has obtained a judgment, they can move on to levy your accounts. That means any stimulus money deposited into those accounts may be subject to garnishment.

Debt Collections: Yes

Collection agencies seeking to collect on a debt that have followed the law to obtain judgments have the same option. That could make your stimulus money up for grabs by anyone seeking to collect on old medical or other private debts if they have successfully acquired a garnishment against your accounts.

How Do You Know If You Have Debts in Collection?

Not sure if your stimulus funds could be in danger from creditors? Understanding the collections process can help. You can also check your credit reports to help you manage personal finances as proactively as possible during the fallout from coronavirus.

Tips for Protecting Your Stimulus Funds

These economic impact payments are meant to help with living expenses during a turbulent time for the country. If you know you have an account in collections and are worried about your stimulus funds being taken for those rather than your immediate needs, you can take a few proactive steps to help protect the incoming money. A little research and planning can go a long way.

Research Laws in Your State

Some states previously passed their own laws to protect stimulus funds from private debt collections. Make sure you know what measures your state put in place. Even if you have an account in collections, you might not have to worry about your stimulus funds being forfeited to the collector if state law forbids it.

Contact Your Creditor to Make Arrangements

If you agree that you owe the money and you can afford to make some type of arrangement, contact your creditor to work out a deal. Make sure you get any agreement in writing so you have proof that the creditor agreed not to move forward with further legal actions or garnishments in exchange for agreed-upon payments from you.

COVID-19 Financial Resources

There are many financial resources available during COVID-19 for individuals. Make sure to do your research and understand what options are available to you. That can help you make the most of any money you do receive while also protecting yourself against debt collectors. For more information, check out Credit.com’s COVID-19 financial resources guide.

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