Published On: April 18, 2020

March 27, 2020 a new law (CARES Act) was passed which gave funds to everyone in order to pay basic necessities (such as food, rent, gas).  Congress forgot to protect those funds from your creditors or your bank.

When Congress passed the CARES Act, they were smart enough to protect the stimulus funds from state and federal government debt collection, but they completely forgot about all the other debt collectors (credit cards, personal loans, bank overdrafts, etc.).  These creditors are the ones that Congress should have been focusing on because they are the great majority of all debt collectors.

Do you owe your bank for overdraft fees or unpaid credit cards?

If so, don’t be surprised if your bank keeps the monies you were supposed to receive as part of the COVID-19 funds.  The monies are coming from the IRS, using the same bank account information that you used for your tax refunds (both this year and last).  If that account is closed the monies will go back to the IRS.  Or if that account is overdrawn, or you are not paying a credit card with that bank, then you may find that your bank keeps the money to “offset” what you owe them.

Is every bank taking the stimulus funds?

Some banks say they will not take the funds (there are differing reports on who will not keep the funds), but only time will tell if they will follow through with their promise to let their customers use those funds as they were intended – to pay rent, food and other absolute necessities.

Several articles:

Some banks are taking coronavirus stimulus checks for overdrawn accounts, New York Post

Your Stimulus Check Could Be Seized By Your Own Bank, Forbes

Some Banks Keep Customers’ Stimulus Checks if Accounts are Overdrawn, the New York Times

Some banks are taking stimulus checks for unpaid debt or fees.  Here’s what to do if it happens to you, the Business Insider

What can I do if the bank takes the funds?

In a conversation with Business Insider, Lauren Saunders, associate director at the National Consumer Law Center, offered these tips:

1. Call the bank and insist they reverse it. If they don’t comply, ask to speak to a supervisor.

2. If that doesn’t work, reach out to a reporter who can publicize the ongoing issue or call attention to a member of Congress who has the power to reach the decision makers.

3. Use social media to “do whatever you need to do” to make the issue known.

Debt collectors can take the stimulus funds

For a debt collector to garnish your bank account they first need to sue you and then get a judgment (this may be different in your state).  Once they have the judgment they can serve a writ of execution on any bank that has your funds (or your employer).  The bank will freeze your account and carve out any amount that is exempt under your state law exemptions.  Exemptions are different in each state so it is important to talk to an experienced bankruptcy attorney licensed in the state where you live.

Twenty state attorneys general and Hawaii’s Office of Consumer Protection asked Treasury Secretary Steven Mnuchin to ensure that debt collectors and creditors cannot take those funds.  A. Treasury spokesperson said the department “is looking into the issue”.  Meanwhile, people who desperately need the money, are left high and dry (after all, they don’t need food for their family just because they are out of work for the last four weeks).

Debt collectors can garnish coronavirus stimulus checks because of a loophole, USA Today



Here’s how to change your bank account information with the IRS: The portal on IRS website where you can update your bank account info is up as of 4/15/20, named “Get my payment“.

I did not file tax returns – how do I get my stimulus money?

Those who don’t have to file tax returns can now submit a simple application to get your COVID-19 funds.  Check out the IRS website.

But, you don’t need to do this if you receive Social Security, SSDI, survivor benefits or supplemental Social Security, Railroad retirement and survivor benefits – your funds will go to the same bank account where those monies are automatically deposited.

WARNING: bank, creditors or collection companies cannot garnish your Social Security, SSDI, survivor benefits or supplemental Social Security, Railroad retirement and survivor benefits, but, at this time, they can garnish your stimulus funds.

stimulus money

Tax Scams

Be very careful of anyone who contacts you asking for information such as your bank account, social security number, or other information that is none of their business.  The IRS has important information about some of these Scams Targeting Taxpayers. Be very careful because this is your financial future and you need to protect it.


Congress passed the CARES Act in record speed, the problem is that they did not think about the needs of the people who really need the stimulus funds.  These are the people who are out of work and cannot afford to pay rent or buy food.  These are the people who cannot pay their bills (perhaps long before we knew about COVID-19).  The stimulus funds were going to be a God-send for those on limited income.  They were going pay rent and buy food, but now they find out that no one cared enough to protect the funds from greedy banks, creditors or collection companies.
Can this be fixed?  Yes, the Treasury Department could designate the funds as exempt from garnishment by redefining the checks as “benefit payments”.  Treasury Secretary Steven Mnuchin is aware of the problem, but has failed to act thus far.
By |Published On: April 18th, 2020|Last Updated: January 22nd, 2023|

Share this article

About the Author: Diane Drain

Diane is a well respected Arizona bankruptcy and foreclosure attorney. As a retired law professor, she believes in offering everyone, not just her clients, advice about bankruptcy and Arizona foreclosure laws. Diane is also a mentor to hundreds of Arizona attorneys.

*Important Note from Diane: Everything on this web site is offered for educational purposes only and not intended to provide legal advice, nor create an attorney client relationship between you, me, or the author of any article. Information in this web site should not be used as a substitute for competent legal advice from an attorney familiar with your personal circumstances and licensed to practice law in your state. Make sure to check out their reviews.*

Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Google Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Yelp Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Avvo Reviews
Avvo - Rate your Lawyer. Get Free Legal Advice.
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Alignable Reviews
Law Office of D.L. Drain, P.A., Arizona Bankruptcy Lawyer - Better Business Bureau

“You folks are the BEST OF THE BEST in Arizona.” M.H.

You and Jay are the best attorneys I have ever had or needed and thank God for the Honorable Robert Gottsfield in recommending you folks – I would have never made it through the entire process without you and Jay and God Bless you both always and stay in touch as well. You folks are the BEST OF THE BEST in Arizona.

“My only regret is that I didn’t find Diane sooner.” K.H.

I can’t say enough good things about Diane. The way she handled my not typical circumstances was amazing. I was very nervous to start the bankruptcy process but Diane just has a very comforting way of explaining the whole process. My only regret is that I didn’t find Diane sooner. If you find yourself in a financial situation that you can’t correct on your own, please Call Diane Drain as soon as possible.

“Filing for bankruptcy can be a stressful life event” R.A.

Filing for bankruptcy can be a stressful life event, and selecting the right attorney can add to this stress. Diane and Jay were a pleasure to work with, and it is obvious that they are passionate about helping people get their life back on track. I would highly recommend them if you need a bankruptcy attorney.

Related Posts

My intention is to put you back in control of your life
Start with $0 down*. We provide affordable payment plans.