Like Summer follows Spring and Fall follows Summer, so too does another round of reminders to debt collectors that stimulus funds are protected from garnishment follow the latest round of stimulus payments now being sent to individuals across the country in the form of the child tax credit.
The child tax credit, part of the American Rescue Plan, provides families with monthly payments of up to $300 per child — depending on their age — for the rest of 2021. Checks and deposits under the credit began dropping last week. The credit is projected to lift as many as 5 million children out of poverty, according to one study.
But like the stimulus payments that were sent out last year and earlier this year, there are concerns, largely from consumer advocates, that the funds aimed at helping individuals and families through the COVID-19 pandemic will instead be plucked away by opportunistic debt collectors who have obtained judgments and are seeking to seize any funds that show up in an individual’s bank account.
The Attorney General of Massachusetts, for example, sent out an alert on Friday notifying everyone that the child tax credits “are exempt from seizure or garnishment” and any attempt to seize or garnish those funds could be considered a violation of the AG’s debt collection regulations.
“These payments are critical for families to provide for their children, including many who are struggling to pay for food, childcare, and other basic costs,” said AG Maura Healey, in a statement. “We are issuing this guidance to put the debt collection industry on notice that these payments are off limits from seizure, and to make sure families are aware of the rights they have under law.”
The statement from the Massachusetts AG follows one from the California Attorney General, who issued his warning more than a month before the child tax credits were even issued.
State attorneys general and courts have been issuing warnings and notifications protecting stimulus funds from garnishment since the first payments were deposited into the accounts of consumers more than a year ago. Collectors were warned — on multiple occasions — that seizing or garnishing stimulus funds would be a bad choice. If the threat of garnishment was so worrisome, the federal government could have taken the step of categorizing the funds from stimulus payments in the same manner that Social Security payments are categorized, thereby protecting them from being seized. But it didn’t. And, to the best of my knowledge, there has not been a rash of any collector or creditor attempting to seize stimulus funds at any point during the pandemic.
