Recipients with unpaid credit card or medical bills for which a company has obtained a judgment against the debtor may see that the new infusion is taken from their bank accounts, which may prevent the needy from getting the emergency cash.
Sen. Oregon Democrat Ron Wyden, according to a spokesman, plans to come up with a solution that will protect the payments from the decoration earlier this week.
But for now, collectors could seize the money, up to $ 1,400 per person, which the federal government deposits directly into people’s bank accounts.
“We really wish it could have passed before the money started going out. The protection would have been much more effective if the payment had been coded in a way so that banks would automatically know to protect the money,” the director of the National Consumer Law Center said Lauren Saunders.
Why the change
The legal aid bill passed in March last year, known as the CARES Act, also did not include the language that protects the first round of stimulus payments, up to $ 1200, from private debt collectors. A stand-alone Senate bill that would protect the payments was passed a few months later with unanimous consent, but not passed by the House.
A coalition of advocacy groups, ranging from the National Consumer Law Center to the American Bankers Association, is urging lawmakers to rectify this.
If the creditor has sued over the debt and there is a court order for the decoration, a bank must hand over the money according to the law, unless Wyden’s proposed bill passes.
Who is eligible for a $ 1400 check?
According to the White House, the third round of payments is expected to reach about 85% of families. Those whose bank information has been submitted to the Internal Revenue Service are likely to receive the money first because it is deposited directly into their accounts. Others may receive paper checks or prepaid debit cards by mail.
Direct deposits started breaking out this weekend and additional amounts of payments will go out in the coming weeks.
Families receive $ 1400 extra per dependent, so a couple with two children can receive up to $ 5,600. Unlike previous rounds, families will now receive the additional money for adult dependents older than 17 years.
The full amount goes to individuals earning less than $ 75,000 in adjusted gross income, heads of households (such as single parents) earning less than $ 112,500 and married couples earning less than $ 150,000. But then the payments are gradually withdrawn as the income increases.
Legislators this time limited the amount of payments so that not everyone who received a previous check will now receive one. It cuts off individuals earning at least $ 80,000 a year in adjusted gross income, heads of households earning at least $ 120,000 and couples earning at least $ 160,000 – no matter how many children they have.
Payments are protected against other debts
The law protects incentive payments from decorating other outstanding federal debt, such as student loans or tax debts.
Those may claim the payment as credit on their 2020 tax return. But none of the three Covid relief bills protect tax credits from debt – not even federal debt.
An IRS spokesman told CNN last week that the agency is investigating what is possible to address the problem. However, people who filed their tax returns for 2020 could have lost all the cash and had no way of getting it back.