Will Trustee Take Recovery Rebate Stimulus Payment in Bankruptcy

Will Trustee Take Recovery Rebate Stimulus Payment in Bankruptcy?

Can the bankruptcy Trustee take the stimulus payment?

The trustee will not take your recovery rebate stimulus payment in bankruptcy, according to the most recent announcement from the government.

You can keep your stimulus (in almost all cases)

(Finally, some GOOD NEWS amidst all the problems caused by Coronavirus!)

When filing for personal bankruptcy, chapter 7 or chapter 13, every dollar counts.

The Federal Government Recovery Rebates under the CARES Act provides for payments of, at most, $1,200 per individual, or $2,400 for a married couple filing jointly, and an additional $500 for each qualifying child under the age of 17.

Will your trustee in bankruptcy try to take this money away from you?

Until yesterday, each trustee I spoke with gave me a different answer.

Some said they would not touch it, as it would be contrary to the intent of the stimulus program.

I agree with this.

Some said they would treat it on a case by case basis.

That seemed like a hopeful answer, since in nearly all cases, the need for the money would be great, but it left room for doubt and uncertainty.

A few said that because the CARES Act did not protect the money, they would be required, they felt, to take it, unless it was protected by an exemption.

The problem with this, in Ohio, is that the exemptions would not cover all of the money for most of my clients.

As expected, we are not the only ones asking these questions.

And, as a result, the United States Trustee Program has issued a statement, reproduced below, which basically says that we will be able to keep the stimulus money, with a “wiggle out” provision for trustees who think that, in an individual case, the stimulus should be considered.

But, if  trustee takes this position, it appears that they will have to report that to the USTP and explain why they would take such a position.

This is GOOD NEWS –

Remember, this stimulus payment, although needed and welcome, will NOT, for most of us, even begin to make a dent in the bills that continue to pile up while we are out of work, working from home, seeing reduced income, drawing unemployment, and facing the serious economic damage caused by Coronavirus.

(one trustee has mentioned that they were told that they “better not touch the stimulus checks!”)

Here’s the link for the official notice:

Stimulus payment in bankruptcy