Garnishment Credit Union Seized 1st Stimulus - Options?

[dandy_andy]

Jurisdiction

Michigan

My 1st stimulus was sent to an open & frozen credit union account, which is frozen due to a delinquent personal loan. My loan officer spoke to their lawyer and said that they could keep it and apply it to my debt.

My understanding is that they can use "right of offset" to legally seize anything in my accounts to pay debts and that this does not require them taking me to court to get a judgement/garnishment against me.

My understanding is that because I technically received the stimulus I am unable to take advantage of the CARES Act's Recovery Rebate Credit.

Am I able to get this money? In case it matters, I live in Michigan and am very low income (can I do something based on undue hardship?)

This irks me so much because I never wanted my stimulus to go to that account in the first place. Thank goodness I got a paper check for my 2019 return so I was able to get my 2nd stimulus and all future ones.

 

[army judge]

My understanding is that they can use "right of offset" to legally seize anything in my accounts to pay debts and that this does not require them taking me to court to get a judgement/garnishment against me.

You've generally explained the "right of offset".

Too bad it wasn't for a tax debt.

As The CARES Act goes, stimulus checks cannot be seized to offset a tax debt.

That means if you owe money on your taxes, or are currently on a payment plan to repay your taxes, the federal government cannot take your stimulus check from you to pay off that debt.

If someone owed child support that was in arrears, the stimulus payment can be offset through the Treasury Offset Program (TOP) to collect delinquent child support obligations that have been referred by the state to TOP. The stimulus payment may be offset up to the amount of child support that is owed.

Am I able to get this money?

Magic Eight Ball says: More than likely, NOT gonna happen.

Good News Ball says: At least the debt you owed was reduced or paid in full.


Let's discuss any other debts a person might owe.
Debt collectors might also be able to seize your stimulus check.
They can't do so directly—creditors aren't going to contact the IRS and have your money diverted to pay off what you owe.
They can garnish your bank account if they have a judgment against you or seek a judgment to do so.

Bottom line, stimulus payments are protected from garnishment if you owe federal or state debt.

That, however, does not apply for private debts.

Thank goodness I got a paper check for my 2019 return so I was able to get my 2nd stimulus and all future ones.

See, there you go, you found it; the SILVER lining.

Good on ya', mate.

 

[adjusterjack]

This irks me so much because I never wanted my stimulus to go to that account in the first place.

At some point you must have done something to get the IRS to direct deposit the stimulus in your account. Maybe you can go online to the IRS and undo it so future refunds won't be deposited. Otherwise any refund you get on your 2020 taxes will go right into that account and be taken if there is still a balance left on the debt.

 

[army judge]

At some point you must have done something to get the IRS to direct deposit the stimulus in your account.

Maybe you can go online to the IRS and undo it so future refunds won't be deposited. Otherwise any refund you get on your 2020 taxes will go right into that account and be taken if there is still a balance left on the debt.

Thank goodness I got a paper check for my 2019 return so I was able to get my 2nd stimulus and all future ones.

OP reveals that he has taken the action to avoid another "money snatch".

 

[Tax Counsel]

My understanding is that because I technically received the stimulus I am unable to take advantage of the CARES Act's Recovery Rebate Credit.

If you got the stimulus check you cannot get a refund of that credit again when you file your 2020 return. While you didn't get the cash to spend as you wanted, you did get the benefit of the money in that it reduced the debt you owe. So no, the government is not going to give you that same money twice.

 

[Zigner]

OP reveals that he has taken the action to avoid another "money snatch".

What one person calls a "money snatch", another would call a contractually-allowed and proper application of the funds to a debt owed.

 

[despritfreya]

What one person calls a "money snatch", another would call a contractually-allowed and proper application of the funds to a debt owed.

Ergo my general rule:

"Never bank where you owe money."

Des.

 

[adjusterjack]

Especially if one can't pay what one owes.