INDIANAPOLIS — The Indiana Supreme Court issued a new order Monday designed to protect stimulus checks from debt collectors. The justices ruled that courts are not allowed to issue any new orders freezing bank accounts or garnishing money that is from a stimulus payment. One notable exception is that child support may still be collected.
However, the Court stopped short of stopping all debt collection during the public health emergency. Debtors are permitted to request a hearing about any previously issued collection order for a judge to determine what money in the account is from the stimulus payment or to claim an exemption. Indiana Legal Services, which petitioned the Supreme Court for the order, expects this provision to impact a small number of people.
The Supreme Court ruling is specific to money received as part of the Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act. When lawmakers wrote the act, they prohibited collecting stimulus payments for student loans or back taxes but did not address general consumer debt.
In its ruling, the state Supreme Court noted that it received input from a number of law firms who represent creditors and that they basically agreed with protecting stimulus money.
“Although responses objected to the breadth of some relief sought, all responses agree the stimulus payments should be protected against garnishment by judgment creditors," the justices wrote.
They also reviewed a letter sent to members of Congress from a number of banks and banking associations urging lawmakers to clarify that stimulus payments should not be collected to pay off debts.
The limits on debt collection are scheduled to last through the public health emergency or until the Court issues a different order.
Indiana Legal Services, which requested the ruling, along with several other organizations posted a response on its Facebook page saying, “This order will ensure stimulus payments are available for life’s necessities during this unprecedented time.”
The Neighborhood Christian Legal Clinic, Prosperity Indiana and the Indiana Institute for Working Families joined the petition filed last week.
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