Stimulus check with a judgment

[Normgreene]

Live in Arizona

My wife and I have a judgment against us that is in its final stages - court scheduled a default hearing Mar 9 but it hasn't been finalized yet and it supposedly went back for a review from what I was told over the phone.

My question is we have two bank accounts that only has our SS income deposited into them (one for each). If the $2400 from the corona virus stimulus is deposited into one of the accounts can it:

a) be seized by the judgment if it gets to the point of being finalized before it arrives
b) when the judgment eventually goes thru is that bank account now tainted and future SS income payments are now open for seizure

I use all of my monthly income to take care of my wife and I and the balances each month end up under $300

 

[quincy]

Live in Arizona

My wife and I have a judgment against us that is in its final stages - court scheduled a default hearing Mar 9 but it hasn't been finalized yet and it supposedly went back for a review from what I was told over the phone.

My question is we have two bank accounts that only has our SS income deposited into them (one for each). If the $2400 from the corona virus stimulus is deposited into one of the accounts can it:

a) be seized by the judgment if it gets to the point of being finalized before it arrives
b) when the judgment eventually goes thru is that bank account now tainted and future SS income payments are now open for seizure

I use all of my monthly income to take care of my wife and I and the balances each month end up under $300

According to what is said currently about the stimulus checks, the money received is subject only to withholding for child support debt. It is not subject to garnishment.

 

[Normgreene]

I agree with that. My question is how is it handled once it's in the bank account. SS income isn't subject to seizure but I don't know how this non SS income will effect my account that only has SS income deposited into it.

Thanks

 

[Normgreene]

Maybe I'm better off just cashing the check rather than depositing it? But it says up to four months to arrive for a hard check.

 

[quincy]

Maybe I'm better off just cashing the check rather than depositing it? But it says up to four months to arrive for a hard check.

I don’t know what to advise you do. There are still a lot of unanswered questions. If you receive Social Security benefits through direct deposit, however, you probably can expect a direct deposit of the stimulus check(s) into the same account.

As far as I know from what has been published, the stimulus funds are not supposed to be subject to garnishment but debt collectors do not always play by the rules.

 

[adjusterjack]

Maybe I'm better off just cashing the check rather than depositing it? But it says up to four months to arrive for a hard check.

Ask someone at your bank what will happen if a judgment creditor attempts to levy the account after the stimulus is deposited. I don't know how much good it will do you but it's worth a try.

 

[quincy]

What sort of debt is it that you have?

 

[Normgreene]

Loan consolidation debt - unsecured - and credit card debt

 

[quincy]

Loan consolidation debt - unsecured - and credit card debt

Thank you for answering my question. I know there have been issues with the Department of Education over student loans. At least you don’t have that particular problem.

You might find your accounts frozen by a collector until you can respond to the freeze with an explanation of where the funds in the account originate (e.g., social security, stimulus check).

Courts will be facing a backlog of cases when they reopen for civil actions and I doubt judges will be pleased with any debt collector who has played games with attempted garnishments of exempt funds.

You can call your bank to see how it will handle garnishments, as suggested by adjusterjack, or you can contact an attorney in your area to see how best to address your outstanding debt.

Good luck. Stay safe.

 

[Taxing Matters]

If you receive Social Security benefits through direct deposit, however, you probably can expect a direct deposit of the stimulus check(s) into the same account.

Not if another account is where the taxpayer had his/her tax refund check for his/her 2018 or 2019 tax returns. The individual stimulus payments are treated as an advance credit to the taxpayer's 2020 income tax return. The bill specifically authorizes the Treasury to electronically deposit that payment as follows:

(B) DELIVERY OF PAYMENTS.—Notwithstanding any other provision of law, the Secretary may certify and disburse refunds payable under this subsection electronically to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes under this title or of a Federal payment (as defined in section 3332 of title 31, United States Code).​

This is found in new Internal Revenue Code (IRC) section 6428(f)(3)(B), added to the Code by HR 748, section 2201(a). So, if there was no account into which federal tax refunds went, they might go to another account where the feds electronically deposit a federal payment, like SSA payments.

As far as I know from what has been published, the stimulus funds are not supposed to be subject to garnishment but debt collectors do not always play by the rules.

Most of the general media do not appreciate the details of tax law and so once again their reporting on this falls short. By way of background, a private creditor (other than a child support obligation) cannot directly garnish a tax refund check. That is, if they sent a levy/garnishment order to the IRS, the IRS would reject it because the law does not authorize private creditors to attach federal tax refund checks. But once that refund check is cashed or deposited, it is simply cash and not protected against attachment by any creditor.

However, tax refunds normally may be offset by IRS to pay the following types of debts:

• delinquent federal taxes owed by the taxpayer for other tax periods or types of tax
• delinquent state income taxes owed
• delinquent child support obligations that have been certified by a state child support enforcement agency
• debts owed to other federal government agencies
• overpaid unemployment benefits owed to the states

What the Act does is state that the stimulus refund checks cannot be offset for other federal or state taxes owed, debts owed to other federal agencies, or for recovery of overpaid unemployment benefits. In other words, the only debt that can hit the refund check before it goes out is for delinquent child support owed. The Act provides no other protection for these payments. So that means that, just as before, once that check goes out and is deposited or cashed, that money can be attached by any judgment creditor.

The law does protect Social Security payments from being attached by a private judgment creditor (other than a child support obligation) even after they are deposited, however. But to get that protection the money in the account generally must be identifiable as being from SSA. Without going into all the details of the rules surrounding this, I'll just bottom line and say my recommendation has always been to have a separate account into which only the SSA payments go to make tracing simple. Have another account to put other funds in. You can electronically transfer funds out of the SSA account to the other account if you prefer to make payments that way.

As for the creditor getting this refund check, if they know about the account that the funds are sitting in, they could attach it. So you want to put the money in an account they don't know about, same as with any other funds you want to deposit and keep safe from the creditor. You'll be able to keep that information from the creditor for only so long, though. Eventually they'll depose you and force you to cough up all the accounts you have.

 

[quincy]

Not unless that account is also where the OP had his/her tax refund check for his/her 2018 or 2019 tax returns. The individual stimulus payments are treated as an advance credit to the taxpayer's 2020 income tax return. The bill specifically authorizes the Treasury to electronically deposit that payment as follows:

(B) DELIVERY OF PAYMENTS.—Notwithstanding any other provision of law, the Secretary may certify and disburse refunds payable under this subsection electronically to any account to which the payee authorized, on or after January 1, 2018, the delivery of a refund of taxes under this title or of a Federal payment (as defined in section 3332 of title 31, United States Code).​

This is found in new Internal Revenue Code (IRC) section 6428(f)(3)(B), added to the Code by HR 748, section 2201(a).



Most of the general media do not appreciate the details of tax law and so once again their reporting on this falls short. By way of background, a private creditor (other than a child support obligation) cannot directly garnish a tax refund check. That is, if they sent a levy/garnishment order to the IRS, the IRS would reject it because the law does not authorize private creditors to attach federal tax refund checks. But once that refund check is cashed or deposited, it is simply cash and not protected against attachment by any creditor.

However, tax refunds normally may be offset by IRS to pay the following types of debts:

• delinquent federal taxes owed by the taxpayer for other tax periods or types of tax
• delinquent state income taxes owed
• delinquent child support obligations that have been certified by a state child support enforcement agency
• debts owed to other federal government agencies
• overpaid unemployment benefits owed to the states

What the Act does is state that the stimulus refund checks cannot be offset for other federal or state taxes owed, debts owed to other federal agencies, or for recovery of overpaid unemployment benefits. In other words, the only debt that can hit the refund check before it goes out is for delinquent child support owed. The Act provides no other protection for these payments. So that means that, just as before, once that check goes out and is deposited or cashed, that money can be attached by any judgment creditor.

The law does protect Social Security payments from being attached by a private judgment creditor (other than a child support obligation) even after they are deposited, however. But to get that protection the money in the account generally must be identifiable as being from SSA. Without going into all the details of the rules surrounding this, I'll just bottom line and say my recommendation has always been to have a separate account into which only the SSA payments go to make tracing simple. Have another account to put other funds in. You can electronically transfer funds out of the SSA account to the other account if you prefer to make payments that way.

As for the creditor getting this refund check, if they know about the account that the funds are sitting in, they could attach it. So you want to put the money in an account they don't know about, same as with any other funds you want to deposit and keep safe from the creditor. You'll be able to keep that information from the creditor for only so long, though. Eventually they'll depose you and force you to cough up all the accounts you have.

That is essentially what I said.

Ah. Never mind. I was assuming that only social security is being collected in two accounts. I was not considering a third account with taxable money from, perhaps, wages.

 

[Taxing Matters]

Ah. Never mind. I was assuming that only social security is being collected in two accounts. I was not considering a third account with taxable money from, perhaps, wages.

Right. I was addressing two distinct things there. I think maybe my zeal for a detailed explanation might have muddied my answer a bit. So for the benefit of the OP and others who are interested, the following is the TL;DR version:

First, how the stimulus payment will be made. As a summary, it goes out by mail unless the IRS/Treasury have authorization from the individual for electronic deposit of federal payments. If there was authorization for electronic deposit of a 2018 or 2019 tax refund, it will go there. If there isn't any such authorization then it may go to another account authorized for electronic federal payments, the most common of these would be SSA/RRB payments.

The second issue was whether the payment can be attached by a private judgment creditor. The summary there is that it cannot be attached before it goes out to the individual for anything other than child support (and the parent owed the support has to go through the state child support enforcement office to get it), but once the individual has the money deposited or the check is cashed it is fair game for attachment like any other cash the individual has.

 

[quincy]

Right. I was addressing two distinct things there. I think maybe my zeal for a detailed explanation might have muddied my answer a bit. So for the benefit of the OP and others who are interested, the following is the TL;DR version:

First, how the stimulus payment will be made. As a summary, it goes out by mail unless the IRS/Treasury have authorization from the individual for electronic deposit of federal payments. If there was authorization for electronic deposit of a 2018 or 2019 tax refund, it will go there. If there isn't any such authorization then it may go to another account authorized for electronic federal payments, the most common of these would be SSA/RRB payments.

The second issue was whether the payment can be attached by a private judgment creditor. The summary there is that it cannot be attached before it goes out to the individual for anything other than child support (and the parent owed the support has to go through the state child support enforcement office to get it), but once the individual has the money deposited or the check is cashed it is fair game for attachment like any other cash the individual has.

I am not sure you are correct with your last sentence.

 

[Taxing Matters]

I am not sure you are correct with your last sentence.

And what is your basis for that uncertainty? This is a tax refund check. I'm extremely familiar with the law on tax refunds. If you want the full explanation of why it works the way I explained it above, I'll give it to you. If you have a citation or source that supports your supposition that the funds would be protected after they are received, please share it. It's not in the section of the Act that covers the stimulus payments. And yes, I've read the actual text of the stimulus law on that.

 

[quincy]

No. This is not a tax refund check. If it were a tax refund check, those who pay no taxes would not be receiving them.

But I don’t really want your “full explanation” either.