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5 January 2021 / Daniel E. Best

Stimulus Funds Directly Deposited Into Savings/Checking Accounts Are Exempt From Execution


On December 21, 2020, Congress passed the Consolidated Appropriations Act, 2021 (Act), which has since been signed by the President. Under the terms of the Act, individual taxpayers will be receiving a second round of stimulus funds. The majority of these funds will be electronically deposited into the customer’s account. The funds are exempt from garnishment. The term garnishment, as defined by the Act, is much broader than garnishment issued by a court, and includes garnishments/levies/orders/etc. issued by a state, state agency, municipality, and even a state child support enforcement agency, including a lien for overdue child support. 

A financial institution has different obligations dependent on how the monies are deposited.

If the stimulus monies are electronically/ACH deposited by the Department of the Treasury, who has identified these monies as stimulus proceeds, the obligation is on the financial institution to determine the exemption. Basically, the monies remain exempt for up to two months from the deposit. The Act provides the following procedure:

Upon receipt of garnishment, the financial institution reviews all accounts in the name of the account holder for a stimulus payment made up to 60 days prior to receipt of the garnishment. If there were stimulus monies received in those 60 days, then the financial institution compares the amount of stimulus monies received into the account(s) to the balance in the account(s) on the day the garnishment is received and the lesser of those two amounts is the exempt amount. For example, if the account holder received $1,200.00 of stimulus monies on January 2, 2021, and a garnishment is received on February 27, 2021, then up to $1,200.00 of monies in the account(s) are exempt (if there was $500.00 in the account on 2/27/2021 then all $500.00 would be exempt compared to if the was $1,500.00 in the account, then only $1,200.00 would be exempt and $300.00 subject to the garnishment).

For all other means that the stimulus monies are deposited into an account, likely by check but possibly by electronic deposit that the treasury did not identify as stimulus monies, then the financial institution would only proceed with the above analysis upon request of the account holder. Upon receipt of the request, the financial institution shall follow the same analysis above and will do so without the judgment creditor’s consent. Although the Act fails to provide any guidance on how the financial institution will identify deposits of stimulus payments in this scenario, the Act does provide that a financial institution who acts in good faith in carrying out its obligations under the Act shall not be subject to any liability or regulatory action under any state or federal law or regulation or court order.

This blog is not a solicitation for business and it is not intended to constitute legal advice on specific matters, create an attorney-client relationship or be legally binding in any way.

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