Your $1,400 stimulus check could be taken by private debt collectors before you see it

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Americans have already started seeing $1,400 stimulus checks in their bank accounts, but some may have their money seized by private debt collectors instead.

A third round of stimulus payments was included in the $1.9 trillion coronavirus relief package signed into law by President Joe Biden on Thursday, and White House Press Secretary Jen Psaki said checks could start rolling out over the weekend. Some people have already reported seeing direct payments in their bank accounts.

Private debt collectors couldn’t garnish stimulus checks in the previous round of payments but will be able to cash in this stimulus check, Fortune reported. That’s because the American Rescue Plan was passed through budget reconciliation instead of its own bill.

The American Bankers Association wrote a letter to Treasury Secretary Janet Yellen last week asking her to support legislation preventing the direct payments from being garnished.

“It is simple to code the payments as exempt, and we believe it is imperative that Congress ensure that these next stimulus payments are treated as ‘benefits’ subject to the federal exemption from garnishment,” the letter reads. “Otherwise, the families that most need this money — those struggling with debt and whose entire bank accounts may be frozen by garnishment orders — will not be able to access their funds.”

Sen. Ron Wyden, an Oregon Democrat and chairman of the Senate Finance Committee, said he will file legislation to protect the money from being seized from debt collectors so “families receive the $1,400 they need to pay rent and buy groceries,” USA Today reported.

Individuals making under $75,000 and couples making under $150,000 will get the full $1,400 payment, plus $1,400 per child or adult dependent. The law will send reduced checks to people earning more than $75,000 and $150,000 for joint filers, and cap the payments at earnings of $80,000 and $160,000, respectively.

The third round of stimulus checks can’t be used to pay off child support debt or IRS tax debt, but could still be seized by collectors to pay off private debt, according to Garrett Watson, senior policy analyst at the Tax Foundation, CNET reported. If your third stimulus check is missing and you have to claim it on your taxes next year, the IRS could use some or all of the money issued as a Recovery Rebate Credit for unpaid student loans or child support, according to the publication.

The $1,200 direct payments under the CARES Act last year weren’t protected from garnishment, but some local and state governments implemented protections anyway, according to USA Today.

“It was pretty uneven and depended on where you were living, the particular circumstances, whether or not it actually protected you or not,” Watson said, the publication reported.