bankruptcyWill you lose your COVID-19 stimulus money if you file for bankruptcy protection?

Simple answer is no.  Read below.
“Recovery rebates” (“stimulus monies”) received as a result of either the CARES Act or CAA are NOT PROPERTY OF THE BANKRUPTCY ESTATE.  Which, in simple English, means the person receiving the funds does not have to give the funds to the bankruptcy trustee.
Title X, Section 1001, of the Consolidated Appropriations Act of 2021 (CAA) contains the bankruptcy relief provisions.  The Act include a temporary revision to the “property of the estate” definition under Bankruptcy Code Section 541 to exclude certain federal COVID relief payments.  Effective date of this Act is December 27, 2020.
See below:

TITLE X—BANKRUPTCY RELIEF SEC. 1001. BANKRUPTCY RELIEF.

(a) PROPERTY OF THE ESTATE.—
(1) IN GENERAL.—Section 541(b) of title 11, United States
Code, is amended—
(A) in paragraph (9), in the matter following subparagraph (B), by striking ‘‘or’’;
(B) in paragraph (10)(C), by striking the period at
the end and inserting ‘‘; or’’; and
(C) by inserting after paragraph (10) the following:
‘‘(11) recovery rebates made under section 6428 of the Internal Revenue Code of 1986.’’.
(2) SUNSET.—Effective on the date that is 1 year after the date of enactment of this Act, section 541(b) of title 11, United States Code, is amended—
(A) in paragraph (9), in the matter following subparagraph (B), by adding ‘‘or’’ at the end;
(B) in paragraph (10)(C), by striking ‘‘; or’’ and inserting a period; and 2036(C) by striking paragraph (11).

MUSINGS BY DIANE:

Law is a complicated set of rules and procedures – many unwritten.  It amazes me how many people do not ask for guidance when they are faced with crippling debt.  They live in fear every day and their family is in that same hell.  There are resources to help everyone learn how to handle their money. 

When something bad happens, like health issues, unemployment, death or divorce, it is time to ask for advice from those who care about your welfare and future.  The Internet is seen as the source for all answers.  Want to learn how to knit?  Go to YouTube for some great videos.  Want to learn if someone can take your wages?  Go to an experienced bankruptcy attorney who cares about you and your future.  Be very careful about asking those who are just out to take your money (yes, even some attorneys – several bad Arizona attorneys are discussed in my website).

– Diane L. Drain
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