Legal aid providers and nonprofits that help the poor are asking the Indiana Supreme Court to protect vulnerable households from having their federal stimulus checks seized by creditors.
As the CARES Act stimulus payments are heading to many households, the Indiana organizations are concerned the money could be diverted from individuals and families in need to creditors, debt collectors and debt buyers. The checks might be taken by creditors like hospitals, auto dealers, landlords and credit card companies rather than being available for households to spend on food, medicine and shelter during the coronavirus crisis.
Indiana Legal Services, along with the Neighborhood Christian Legal Clinic, Prosperity Indiana and the Indiana Institute for Working Families, filed the petition Tuesday with the Indiana Supreme Court.
The agencies are asking the state’s highest court to suspend the rule that implements holds of up to 90 days on bank accounts. Also, they are asking the court to issue an order ensuring the release of the CARES Act payments to individuals or families who have judgments or garnishments filed against them.
“For the period of the national emergency, we are asking the court to suspend the rule so that people can use the money they are getting from the government for the reasons the money is intended,” Jon Laramore, executive director of Indiana Legal Services, said. “We’re not asking the statute be suspended. We are asking the court rule be suspended.”
The organizations contend shielding the money from nongovernmental creditors would be in keeping with the spirit of what Congress intended. Already the stimulus payments are protected from being used to settle certain federal and state government debts like unpaid taxes and federal student loans.
“While Congress may not have explicitly provided for protection of the stimulus payments from nongovernmental creditors in state courts, it is clear that the payments, authorized during a national emergency and not subject to any government offset, are intended to benefit citizens with immediate and dire needs, and not to benefit their creditors, or debt collectors and debt buyers,” the petition stated.
In addition, the petition argues protecting the stimulus payments is consistent with Article 1, Section 22 of the Indiana Constitution. This provision enables the debtor to have the necessary comforts of life by exempting a reasonable amount of property from seizure or sale for the payment of debt or liability.
Laramore emphasized the petition is not requesting the judgment or garnishment be forgiven. It is only asking the stimulus funds be protected during the pandemic emergency.
“We expect most of our clients will need to use this money immediately for things like rent and food,” he said.