New Bill Protects Your Stimulus Money From More Creditors

A worried woman in a mask and gloves protects a piggy bank
Photo by Alliance Images /

The new coronavirus stimulus package unveiled by Senate leaders on July 27 might be dominating headlines, but it’s not the only pandemic-related bill in motion.

On July 23, the U.S. Senate unanimously passed a bill that would protect stimulus payments from garnishment by non-governmental creditors and debt collectors.

It’s known as Senate Bill 3841, or “A bill to protect 2020 recovery rebates for individuals from assignment or garnishment, and for other purposes.”

How it would work

Technically, Senate Bill 3841 would amend the Coronavirus Aid, Relief, and Economic Security Act, better known as the CARES Act. That’s the federal law that authorized the first round of economic stimulus payments for taxpayers.

The CARES Act generally prevents stimulus payments from being reduced to cover debts to federal and state agencies, with the exception of delinquent child-support payments.

But as it’s currently written, the CARES Act does not prevent other types of creditors and debt collectors from garnishing stimulus checks, says Sen. Chuck Grassley, R-Iowa, chairman of the Senate Finance Committee and sponsor of the new bill.

Grassley explained upon introducing Senate Bill 3841 in late May:

“We established these recovery rebates to help individuals and families through the tough times of this pandemic. We did not establish them just so debt collectors could swoop in and undermine that purpose. Our bill will add additional protections from garnishment, preserving congressional intent and shielding folks who need the help.”

Specifically, Senate Bill 3841 protects:

  • Electronic payments, including direct deposits, by directing the Treasury Department to encode stimulus payments so banks can identify them and in turn protect them from garnishment.
  • Other payment forms, including checks, by allowing taxpayers to ask banks to protect their stimulus payments from garnishment, and by authorizing banks to do so.

Now what?

It’s unclear whether Senate Bill 3841 would protect only future stimulus checks, or also retroactively protect stimulus checks that already have been issued and garnished.

The brief piece of legislation states only that its amendments “shall take effect on the date of the enactment of this Act,” meaning the date on which Senate Bill 3841 is signed into law by President Donald Trump.

That’s assuming the bill makes it that far.

Before it could be signed into law, both chambers of Congress must pass identical bills, which is a trickier process for tax-related legislation. Tax attorney Kelly Phillips Erb explains in Forbes:

“The bill won’t move on to the House. Procedurally, it can’t since it’s a tax bill. However, Sen. Grassley is urging the House to pass an identical bill so that it can eventually work its way to President Trump’s desk.”

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