Which states have banned debt collection during the coronavirus crisis?
Debt collectors can take your stimulus check. But not everywhere.
Debt collectors can take your stimulus check. But not everywhere.
COVID-19 has hit the nation’s wallets as well as its health. There are a record number of jobless claims and businesses remain closed as people stay home to slow the spread of the virus.
Many were in debt even before the novel coronavirus epidemic – according to the Urban Institute, in 2018, nearly a third of Americans were in debt collection. This number will only increase as the country grapples with the fallout from this unprecedented crisis.
This is why many people fear that their dunning checks will be swallowed up by debt collectors. For those struggling to afford essentials like food and shelter, losing that one-time payment of $ 1,200 will mean losing a much-needed lifeline.
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Debt collection and stimulus check
Unlike some government payments – such as Social Security and disability benefits – your stimulus check is not protected by federal law from all collection agents.
Cash owed to federal or state authorities can only be seized to pay child support. But the CARES law does not protect you from private debt collectors and will not prevent a bank from allocating that money to existing charges or overdrafts.
Several large banks have promised not to use the stimulus checks in this way, but the debt collectors have not made such promises. If you have a court ruling against you, your stimulus check could be taken directly from your account, which is also called garnishment. The courts can also order the freezing of your account. This is why a number of states have put in place their own legislation to protect those hardest hit.
To be clear, if you owe money but there is no judgment against you, debt collectors cannot withdraw money from your account. Make sure check your credit reports regularly so as not to be caught off guard.
Which states have banned debt collection?
Some states have temporarily put a stop to debt collection in several ways. Some state authorities have restricted the seizure or garnishment of stimulus checks. Some have banned garnishment altogether. And in others, court systems have been suspended so that no new orders or writ can be issued. However, keep in mind that if there is a court order against you, it could still be enforced in those states.
According to the National Consumer Law Center, the following states have new rules on debt collection during COVID-19.
- California: Dunning checks cannot be entered. The governor also ordered that any money collected be returned.
- Illinois: The governor suspended the permits authorizing the garnishment on April 14. The Illinois Supreme Court’s measures passed on April 24 mean that funds up to $ 4,000 seized after March 8, 2020 must be returned.
- Indiana: Originally ordered that courts cannot issue summons until the state of emergency ends. Then, on April 20, he also stopped the garnishment of stimulus payments.
- Iowa: The governor has suspended garnishment and debt collection activities until April 30, although this can be extended.
- Maryland: A governor’s order states that stimulus payments are exempt from garnishment.
- Massachusetts: In one of the first states to take steps to limit debt collection during the crisis, stimulus funds cannot be seized and debt collectors may not take further action during the health emergency.
- Nebraska: The attorney general said the state would enforce existing rules that prevent creditors from seizing money needed for basic necessities.
- Nevada: The issuance of court orders authorizing the garnishment of wages was suspended until April 30.
- New York: Stimulus payments cannot be garnished under New York law. Other debt collection practices were banned during the crisis.
- North Carolina: Suspension of the recovery of State debts.
- Ohio: The attorney general said the stimulus payments are exempt from garnishment.
- Oregon: The governor has ordered that stimulus checks cannot be seized.
- Rhode Island: The attorney general has declared the stimulus checks elusive.
- Texas: Summons can be issued, but bank accounts cannot be seized or frozen until May 25.
- Virginia: Declared a judicial emergency, meaning the courts will not operate – and therefore will not issue garnishments – until May 17.
- Vermont: The attorney general said on April 21 that stimulus payments are exempt from garnishment.
- Washington: The governor banned certain garnishments until May 14.
- Washington DC: As part of a number of measures adopted by the mayor on April 10, creditors and debt collectors cannot initiate or act on any garnishment or withholding of income or funds. This applies during the health emergency and for 60 days after.
In other states, including Georgia, Missouri and Pennsylvania, county courts have suspended garnishment hearings or stopped issuing writs.
Almost all of the states that have restricted debt collection activities have made exceptions for child support, victim restitution, and similar payments. And each state periodically reviews its suspensions to extend them as needed.
Ways to Protect Your Stimulus Control
If you’re worried about losing your stimulus check to a debt collector, whatever you do, don’t just ignore the problem. First, find out what the current rules are in your state. Even though they’re not listed above, states are releasing new guidelines every day, and you can still be protected.
If you owe the bank money, contact them by phone or email. A number of financial institutions have difficulty programs in place, but only for customers asking for help. Explain how COVID-19 has impacted your finances and find out what your options are.
If you already have a court ruling against you, one immediate action you can take is to request that your stimulus check be mailed to you, rather than deposited in your Bank account. And if you don’t have a judgment against you but are struggling to keep up with your payments, talk to your lender as soon as possible.
Even though some states have temporary protections in place, you will still owe this money after the emergency has passed. If you’ve been contacted by a debt collector, start with read about your rights. Then ask for a written confirmation of the debt. If you think you don’t owe the money, you can dispute it. If the debt is older than your state’s statute of limitations, you don’t have to pay it.
You may be able to find a way to settle the debt, but the sooner you act, the better. Dealing with debt collectors isn’t easy, but whether or not your state has stepped in to protect your stimulus check, you can’t avoid the problem forever.