The good news – the government is issuing stimulus checks to many middle-class families during this global crisis!
The bad news – there may be old creditors waiting in line to take your money.
So, what should you do?
Individuals making less than $75,000 can expect to receive $1200 as an individual. A married couple needs to jointly be making less than $150,000. You also get an additional $500 per child 16 years old or younger. For individuals making less than $99,000 (or a married couple making less than $198,000), you will still receive a payment, but it will be less than $1200.
However – there may be old creditors that will try to take that money from your bank account.
How do I know if this applies to me?
First – the money will not be taken for debts owed to the government – for back taxes, student loans, or an overpayment from a government agency, like Social Security or the Department of Labor (unemployment). An exception to this is for back child support. The stimulus may be taken for that.
This post will specifically discuss your run-of-the-mill, ordinary creditors – like credit cards, medical debts, banks, finance companies, payday lenders, etc.
Normally, when you owe money to one of these types of companies, they can sue you in court. If they win, they get a “judgment” against the person. That’s basically a court order stating that someone owes them money.
Sometimes people don’t realize they have judgments. If you were served with court papers and you didn’t file an answer, or don’t remember going to court, it is possible a “default” judgment was entered against you. That means the creditor automatically got what they were asking for because the person didn’t respond. Sometimes, but not usually, you can try to challenge this after the fact.
If you know that you have judgments – if people have sued you and you didn’t hear back, or you lost in court – then the following may apply to you. If you have had your wages garnished in the past, or your bank account, this probably applies to you.
I know I have judgments against me. What does that mean?
If you have judgments against you, a creditor can collect that in a few different ways. Commonly, wages are garnished. Pretty rarely, they try to sell someone’s house or a vehicle.
A relatively common way to collect judgments is to garnish someone’s bank account. So, if you know you have been sued in the past and have judgments against you, those creditors could try to garnish your bank account. And if they happen to hit your account the same day that you get your federal stimulus – they could try to take it.
What should I do if I get a bank account garnishment?
You may be able to claim your money as exempt. Under federal law that applies in Alabama, tax refunds, like the EITC, are exempt. That may also apply to the stimulus payments.
Alabama also allows people to claim a certain amount of money as exempt, and that can broadly be applied to any personal property you have. That amount is currently $7,750. If the stimulus payment is less than that, it should be exempt. Most people’s stimulus payments will probably be less than that.
How do I claim my money as exempt?
Call Legal Services Alabama at 1-866-456-4995 or complete an online application here. We provide free legal assistance to low income persons. You can also call us if you have questions about whether or not this applies to you and what steps you need to take to protect your money.
There is also a form from the Alabama State Bar available here.
Can I take any other steps to protect my money?
The federal stimulus payments will go to whatever bank account is on file with the IRS. You may be able to request a paper check or ask that the funds go to a different account. If you are worried about creditors, you can try this. However, this will likely delay your payment.
Call Legal Services Alabama at 1-866-456-4995 or contact the South Alabama Volunteer Lawyers Program if you have questions.
Thank you to Farah Majid for answering some questions on the federal stimulus funding. She has been an attorney at Legal Services Alabama since 2012. She has served as a Staff Attorney in LSA’s Mobile and Huntsville offices. She is currently the Coordinating Project Attorney for the Rural Economic Improvement Project and was previously the Consumer Lead Attorney for LSA. She has led efforts at LSA to protect debtors’ wages from garnishment, including statewide advocacy, appellate litigation, and training of lawyers. The foregoing is provided for informational purposes only and is not intended to constitute legal advice. You should consult with a licensed Alabama lawyer in order to get advice about your particular situation.
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Posted on Thu, April 16, 2020 by SAVLP