States prevent the money from being garnished

New $ 1,400 stimulus vouchers are designed to help millions of Americans weather the financial hardships of the Covid-19 pandemic.

Yet the legislation allowing these payments has one major caveat: the funds could be seized on overdue unpaid debts.

That’s true for private debts, such as medical bills or credit card debts, which are subject to a court order.

The American Rescue Plan Act, passed through a process called budget reconciliation, did not protect the incentive checks from seizure.

More from Personal Finance:
Stimulus control less than expected? How the IRS will let you know
How to deal with an inherited 401 (k) or IRA
People weigh “ revenge spending ” with a $ 1,400 incentive check

Democratic sens. Sherrod Brown of Ohio, Ron Wyden of Oregon, Bob Menendez of New Jersey and Chris Van Hollen of Maryland have submitted a proposal to protect the incentive payments from private debt collection agencies.

But efforts to push that bill forward were halted by Senate Republicans last month.

Senator Brown will continue to look for ways to ensure that federal payments go to American families and not debt collection agencies, the legislature said.

In the meantime, some states have made efforts to protect the payments. The efforts are similar to last year, when the first $ 1,200 stimulus vouchers were also subject to seizure. (The $ 600 incentive vouchers approved by Congress in December were generally exempt.)

Here’s a work list of states that have taken action so far.

Previous incentive controls were protected from seizure by Colorado lawmakers.

However, this does not apply to the new $ 1,400 incentive vouchers.

“We are currently working on another bill to increase general seizure protections, which would help protect new incentive checks,” said Lawrence Pacheco, communications director at the Colorado Attorney General’s Office.

Massachusetts Attorney General Maura Healey issued guidelines in March that exempted $ 1,400 incentive checks from seizure or seizure under state law.

“These incentive payments should go directly to the people and families who are struggling to pay for housing, food, utilities and other basic necessities, and not into the hands of collection agencies,” Healey said in a statement.

However, the guidelines do not apply to actions of the Massachusetts Department of Revenue, including actions related to child support arrears.

In January, Minnesota Governor Tim Walz, a Democrat, amended and renewed an executive order classifying the money as “need-based government assistance,” which is still in effect.

The incentive funds are exempt from collection for at least six months after they are received, according to the Minnesota Attorney General’s Office.

Nebraska Attorney General Doug Peterson issued an announcement in March clarifying that the $ 1,400 incentive checks may be exempt from seizure, seizure, or execution for some low-income individuals.

“Nebraska law exempts certain income and property from execution and seizure by creditors and debt collectors,” the announcement said. “The purpose of these exemptions is to ensure that individuals have enough income and property to meet basic needs such as housing, food and utilities.”

New Jersey Gov. Phil Murphy, Democrat, announced in March that certain financial institutions in the state had agreed to protect the $ 1,400 checks from ingestion.

“We want residents who have received their federal stimulus money to be able to use it as they see fit,” Murphy said in a statement. “I am pleased that 50 banks and credit unions have signed our agreement to protect these federal payments received by New Jerseyans from attachment of past debts or overdrafts.”

The protection lasts for a minimum of 30 days after the money has been deposited into a consumer’s account.

New York Attorney General Letitia James issued guidelines in March to prevent debt collection agencies from seizing payments of $ 1,400.

“These official guidelines make it clear that banks and debt collectors cannot freeze or confiscate stimulus funds intended for New Yorkers, especially those most in need today,” James said in a statement. “My firm remains committed to protecting the rights of New Yorkers and ensuring that any institution that violates these guidelines is held accountable to the fullest extent of the law.”

In addition to attachment, the guideline also applies to settlements, where money in accounts is used to pay debts to banks.

However, the guidelines do not apply to New York State measures, such as attempts to collect overdue child support.

According to a spokeswoman for Oregon Attorney General Ellen Rosenblum, Oregon continues to protect stimulus vouchers from seizure after the Oregon legislature passed a law in an emergency session.

In addition, the Oregon Child Support program will not garnish incentive checks from financial institutions, the spokeswoman said.

Rhode Island Attorney General Peter F. Neronha recently issued guidelines indicating that the $ 1,400 incentive checks are protected from seizure or seizure by debt collection agencies.

“These payments are a lifeline for so many Rhode Island families devastated by the pandemic,” Neronha said in a statement. “They belong to the recipients and are not fair game for debt collection agencies.”

In addition, the attorney general’s office will take action to enforce the law if a creditor tries to grab an incentive payment.

Virginia Attorney General Mark R. Herring announced a change in law last week to protect the $ 1,400 incentive checks from debt collection agencies.

The law was initially passed last year to protect the $ 1,200 CARES Act payments from seizure.

The amendment “ensures that Virginians are able to keep all of their federal stimulus payments and protect that money from collection agencies and creditors,” the announcement said.

In March, Democrat Governor of Washington Jay Inslee updated a consumer debt seizure proclamation with a new language in which “federal payments of any kind have been issued in response to the Covid-19 pandemic,” which applies to the $ 1400 incentive payments.

“Your stimulus check should help pay for necessities, such as food and rent,” Washington Attorney General Bob Ferguson said in a statement. It shouldn’t be garnished to pay medical bills.

“If the consumer collection agencies go after your incentive payment, please contact my office.”

This article may be updated as new information emerges. Please check again for updates.

Have you struggled to get your $ 1,400 stimulus check because of unpaid debt and are you willing to share your story? E-mail [email protected]