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Stimulus Payments and Bank Account Garnishments: What Financial Institutions Should Know

On April 20, 2020, the Indiana Supreme Court published Order No. 20S-MS-258, which seeks to protect individual stimulus payments authorized by the Federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act from attempts by private creditors to garnish those payments during the COVID-19 state of emergency. 

In so holding, the Indiana Supreme Court ordered that until expiration of the COVID-19 public health emergency, Courts shall issue no new orders placing a hold on, attaching, or garnishing funds in a judgment-debtor’s account in a depository financial institution if those funds are attributable to a stimulus payment.  That said, the prohibition against new garnishment orders does not include judgments or orders for payment of child support. 

For previously issued orders of garnishment, judgment-debtor are entitled to a hearing (in-person or remote) within two (2) business days of a court’s receipt of such request, which must be treated as “essential” and “urgent,” to determine what funds in the account are attributable to a stimulus payment and for the judgment-debtor to assert any exemptions under state or federal law.

Depository financial institutions that receive new orders that attempt to place a hold on, attach, or garnish funds in a judgment-debtor’s account should carefully review the judgment-debtor’s account to determine whether it contains monies from the U.S. Government CARES Stimulus fund.

Indiana’s state of emergency in response to the COVID-19 pandemic is currently set to expire on May 1, 2020.

Please contact your KDDK attorney or any member of the KDDK Debt Collection Practice Team for additional information and individualized guidance on how Indiana Supreme Court Order 20S-MS-258 may affect your business.

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