$1,400 Stimulus Checks Could Be Seized By Debt Collectors

The first batch of $1,400 stimulus check payments have started to arrive in the bank accounts of millions of Americans. The payments were included as part of the $1.9 trillion American Rescue Plan passed by the Democratic House and Senate last week and signed into law by President Biden. No Republican voted for the legislation, which meant that Democrats had to resort to a budgetary maneuver known as reconciliation to pass it.

While this rule-making process allowed Democrats to pass the stimulus package with a simple majority vote, it also constrained their agenda. Specifically, reconciliation prevented Congress from including a provision to protect stimulus checks from being seized by private debt collectors. The result could be disastrous for millions of Americans and disproportionately for Americans of color who are relying on the payments as a financial lifeline.

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$1,400 Stimulus Checks Can Be Seized By Private Debt Collectors

The $1,400 stimulus checks will buoy millions of Americans who are struggling with the financial consequences of the coronavirus pandemic. A family of four could receive $5,600 over the next few days to pay rent, buy groceries and other essentials, and maybe even save for a rainy day. However, part or all of that $5,600 could disappear from the family’s bank account just as quickly as it arrived. That’s because the American Rescue Plan did not, and could not, include a provision to prevent private debt collectors from garnishing stimulus checks.

We’ve already seen the disastrous effects of this policy when the first round of stimulus checks when out in 2020. While the March Cares Act ensured that stimulus checks were not subject to federal and state debt, it did not address private debt, which could include credit-card debt, medical debt, and education debt. “Anyone with a judgment against them for credit-card debt, medical debt or any other kind of private debt can lose their stimulus money to a debt collector,” CBS News wrote last April.

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The Covid relief bill passed in December sought to address this oversight and included protection from private debt collection. However, the most recent bill was unable to include a similar exemption. The reason is that the American Rescue Plan was passed using a budget maneuver known as reconciliation. “Reconciliation is a process to make budgetary changes that allows you to avoid dealing with the Senate filibuster,” explained Zach Moller, Deputy Director of the Economic Program at center left think tank Third Way.

www.forbes.com/sites/shaharziv/2021/03/15/beware-1400-stimulus-checks-could-be-taken-from-you/?sh=5aba9245155e

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