This may come as a shock, but private debt collectors can seize your stimulus check. Here’s what you need to know.
That $1,200 stimulus check may be gone faster than it arrived.
If you owe money for your private student loans, credit cards or medical bills, your stimulus check may be at risk. The CARES Act – the $2 trillion stimulus package to help provide financial relief to Americans in the wake of the COVID-19 pandemic – provides several protections against collection of most federal and state debt. For example, the CARES Act protects you against garnishment of wages, tax refunds, or Social Security, disability or veteran’s benefits to collect defaulted federal student loan debt or unpaid taxes through September 30, 2020.
Who’s At Risk
However, the CARES Act does not specifically prevent a private debt collector from grabbing your stimulus check to satisfy your unpaid medical bills, private student loans or credit card debt. Given this apparent “loophole” to protect seizure of outstanding debt, private debt collectors can legally seize a stimulus check to satisfy debt obligations through garnishment in a bank account, for example. According to the National Consumer Law Center, debt collection impacts approximately 71 million Americans, or about 1 in 3 adults. As a result, millions of Americans – particularly those who need this stimulus check for basic needs – could be deprived of their only source of income during the COVID-19 pandemic.
Will Stimulus Checks Be Protected From Debt Collection?
Governors from several states such as Washington, Illinois and Oregon have issued executive orders to prevent private debt collectors from seizing federal stimulus checks from people in their respective state. “Many Oregonians, through no fault of their own, are struggling to pay their bills, their rent, or even buy essentials like groceries and prescription drugs,” Oregon Governor Kate Brown said. “These recovery checks were meant to provide relief, not reward debt collection agencies for preying on Oregonians who have lost their livelihoods.”