Non-Child Support Debtors May Find CoronaVirus Payments Garnished

Kenya N. Rahmaan

Source: RC Hill Publishing

As the announcement was made that non-custodial parents (NCPs) allegedly owing child support would not receive a CoronaVirus stimulus payment, there were many reactions across social media.  On the one hand, NCPs, reeling from pandemic both financially and emotionally from being alienated from their children, are understandably upset about the exclusion from the much needed payment.  While others, mostly custodial parents, not only agree with the government’s choice to exclude the other parent from receiving the payment, but are finding humor in the decision. The reaction of custodial parents and supporters of the child support system to ban NCPs from receiving a payment designed to help during this financially devastating time is both selfish and hypocritical.  Especially considering that many of these people owe debt to other companies outside of the government and would be extremely distressed if a debt collector intercepted their stimulus payment to recover a debt that he or she is accused of owing. Offsets of income tax refunds are a regular occurrence for NCPs after they file their annual taxes. 

To be clear, according to The Office of Child Support Enforcement (OCSE) (2019), an offset occurs when the Federal Income Tax Refund Offset Program intercepts federal tax refunds of noncustodial parents who owe past-due support.  However, there have been new reports that if non-child support debtors owe certain debts, their bank accounts may be frozen by debt collectors.  One may think that these are two separate issues, however, they are very similar considering one staple similarity. As with NCPs, there are little to no remedies in place to ensure that money seized from tax intercepts or bank account seizures can be recovered once intercepted.  Likewise, there may be limited remedies to restore seized bank accounts of those not involved with the child support system. This may, finally, make people aware of how NCPs are negatively affected by tax offsets and bank seizures executed by the child support system.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act provides fast and direct economic assistance for American workers, families, and small businesses, and preserve jobs for our American industries, (United States Department of Treasury).  The Federal government has included provisions that make certain debts (i.e. student loan debt, taxes debt, etc.) exempt from being offset. However, as Sarah Hansen from Forbes (2020) reported,  there is no provision in the CARES Act that prohibits private debt collectors from garnishing stimulus money that is sitting in a personal bank account.  The tactic of forcing people to sign up for direct deposit and using bank account seizures to collect on a debt is nothing new to people involved with the child support system.  

Recipients of Social Security and Supplemental Social Security benefits were mandated to apply for bank accounts in order to receive payments via direct deposit several years ago.  According to the Social Security Administration (SSA), a new law went into effect March 1, 2013, requiring that you receive your payments electronically.   The result of the mandate was that thousands of NCPs reported that their bank accounts had been frozen and seized to pay for child support arrears.  Because there are minimal protections provided to NCPs when they deal with the child support system, most of the time, the money is never returned. They are left with nothing and cannot close the bank account and receive a paper check because the Treasury can only grant exceptions to this mandate on ‘rare occasions’.

The government has included social security payments money that cannot be seized during the CoronaVirus pandemic, as long as the payment is made within a specific time frame.  The Treasury Department released ‘Guidelines for Garnishment of Accounts Containing Federal Benefit Payments’ in March of 2020 which outlined the following instructions:

Financial institutions that receive a garnishment order are required to determine the sum of protected federal benefits deposited to the account during a two month period, and to ensure that the account holder has access to an amount equal to that sum or to the current balance of the account, whichever is lower.

Citizens can be comforted in knowing that their money is safe for at least two months during a specified time frame. If a debt collector can prove that the garnishment covers money held in or deposited into the account outside of the designated time frame, the money may be legally seized.  And then, just like so many NCPs, their money may be gone forever.

Source: RefundTalk.com

Surprisingly, when NCPs and child support reform advocates contacted government officials and child support case workers about possibly suspending child support payments during the pandemic, the answer was a resounding, NO.  There was no uproar or even a whisper concerning the negative impact this refusal would, undoubtedly, have on parents as they try to survive during the COVID-19 pandemic. The uproar is happening now that other people may have their stimulus money seized.  The National Consumer Law Center (NCLC) (2020) is demanding that the Department of the Treasury must act immediately to ensure that the stimulus payments about to go out to millions of Americans are available for food and necessities and are not grabbed by debt collectors.  This is proof that the U.S. views and treats NCPs as second class citizens no matter what crisis the country may be fighting.

There are a couple of states that have implemented some type of protections for its citizens in the event that bank accounts are frozen during the stimulus payout.  Massachusetts and Texas have issued their own emergency regulations that prevent debt collectors from issuing new garnishment orders, but most states don’t have those protections, (Hansen, 2020).  Ohio is the latest state to issue protections for stimulus money. For states without protections, such as Nebraska, the KNEB station has shared a letter from Legal Aid of Nebraska explaining some steps someone can take if their bank account is seized after the stimulus money has been deposited.  It is important to note that the stimulus money has been designated to assist low and middle class citizens (and corporations) so every penny that reaches these households is much needed, and the same is true even in NCP households.

Just like with child support debt collectors, private debt collectors will pull every trick to collect on an outstanding.  According to Legal Aid of Nebraska, under Nebraska law these payments are probably ultimately exempt for most low-income families (after a complex legal process, including a court hearing), creditors can still take these stimulus payments by moving ahead and garnishing bank accounts.  Unfortunately, most people are unaware of how to maneuver through a complex legal process which may or may not include a court hearing. And what if there are court costs and filing fees involved? Most low-income people do not have the money or the time to fight a bank seizure.

Source: Lane CPA

After the garnishment is issued and the bank account is frozen, the account holder will be unable to access any of the funds that could be used for rent, groceries, and other necessities.  The account holder, once he or she realizes that their account has been frozen, must act quickly. The presumption will be that the stimulus payment funds are not exempt, unless the debtor requests a hearing, files an inventory, and attends a court hearing, (Legal Aid of Nebraska).  If the account holder merely checks their account to verify receipt of the deposit without withdrawing the money right away, the money may not be available when he/she attempts to access the funds.   

What makes matters worse, there is  a very small window of time in which the account owner can act and try to have the account freeze unfrozen.  Legal Aid of Nebraska (2020) explains that after three days, if no hearing is requested, creditors can request that the bank turn the funds over to the creditor.  Without some sort of protections, there is no way to determine how many citizens across the country will find themselves being treated just as NCPs have been treated for decades.  The more information that becomes available concerning the stimulus money allegedly intended to assist people in this time of need, the more it seems that it is really here to help the debt collectors.

As the country and world continue to battle with the CoronaVirus and will hopefully soon begin to recover, there are certainly lessons that we can learn from the pandemic.  One very important lesson is that NCPs have been treated as second class citizens for a long time with zero recourse. One of the most devastating examples of second class treatment endured by NCPs is through financial abuse.  People cheer when a non-residential parent, mostly fathers, has all of their money taken and he or she is left with next to nothing to survive. However, the situation is not as cheerful when other low-income citizens have their bank accounts seized in order to cover a debt that they may or may not owe. 

In hundreds of thousands of child support cases, the debt is owed to the government and will never reach the children that the funds are supposed to be used to help.  In those same cases and hundreds of thousand more, arrears on child support cases are calculated retroactively, which causes NCPs to start the child support case indebted for tens of thousands of dollars.  These parents never recover from the debt and are always subject to bank liens. And they are continuously ignored. We as a nation and as a world, can and must treat NCPs as citizens, and not second class citizens.  In other words, when and if a private debt collector garnishes your stimulus money, imagine how a NCP feels every payday, every tax season, and anytime the child support agency feels the urge to freeze and seize their bank account.

References

Hansen, S. (2020, April 10). Stimulus checks are coming next week. Could private debt collectors grab them? Forbes. https://www.forbes.com/sites/sarahhansen/2020/04/10/stimulus-checks-are-coming-next-week-could-private-debt-collectors-grab-them/#4b7693561f57KNEB. (2020, April 13). 

Federal stimulus payments intended for basic needs may disappear for thousands of low-income Nebraskans unless action is taken. https://kneb.com/regional-news/federal-stimulus-payments-intended-for-basic-needs-may-disappear-for-thousands-of-low-income-nebraskans-unless-action-is-taken/

National Consumer Law Center. (2020, April 1). U.S. treasury must protect stimulus payments from garnishment by debt collectors. https://www.nclc.org/media-center/u-s-treasury-must-protect-stimulus-payments-from-garnishment-by-debt-collectors.html

Office of Child Support Enforcement. (2019, February 1). Overview of the federal collections and enforcement program. Office of Child Support Enforcement | ACF. https://www.acf.hhs.gov/css/resource/overview-of-the-federal-collections-and-enforcement-program#fop

U. S. Department of Treasury. (n.d.). The CARES Act works for all Americans. Front page | U.S. Department of the Treasury. https://home.treasury.gov/policy-issues/cares

U.S. Department of Treasury. (n.d.). Federal withholdings and offsets. Bureau of the Fiscal Service. https://fiscal.treasury.gov/top/faqs-federal-withholdings-and-offsets.html

U.S. treasury must protect stimulus payments from garnishment by debt collectors. (2020, April 1). National Consumer Law Center. https://www.nclc.org/media-center/u-s-treasury-must-protect-stimulus-payments-from-garnishment-by-debt-collectors.html