A month before the federal Child Tax Credit payments start landing in the bank accounts of individuals across the country, the Attorney General of California issued a warning to financial institutions, creditors, and debt collectors that it is illegal to seize those funds to pay individual debts under a state executive order.
In April 2020, California Gov. Gavin Newsom issued an executive order making it illegal to garnish any financial assistance provided to individuals as a result of the COVID-19 pandemic. The Child Tax Credit, in which families with young children will receive $300 per month and families with kids between six and 17 will receive $250 per month, was created as part of the American Rescue Plan in response to the pandemic.
“The pandemic has been tough on families across California,” said Attorney General Rob Bonta, in a statement. “The Child Tax Credit payments should be a bright spot for our families, putting money in their pockets as the country begins our recovery. No parent should go to bed worried that these payments will be seized by some debt collector.”
The concerns about funds from the different stimulus packages that have been issued to individuals during the pandemic being garnished do not look like they will ever go away. A number of states have enacted protections aimed at making sure that collectors or creditors do not seize those funds as part of garnishment orders or judgments. The furor became so great that many of the industry’s trade associations were forced to make statements or issue press releases reaffirming that collectors are not on the hunt for stimulus funds as a way of recovering payments on unpaid debts.
