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Sunday, January 23, 2022

Intercepting Stimulus Checks: Child Support Debt Collectors Deny Basics

Many people were denied the first stimulus check of $1,200 because they owed child support. Under the law, the first check was allowed to be garnished for child support debts. There are thousands of such cases across California, where fathers who owed previous child support debts didn’t receive the first stimulus check.

Money that was meant to save people in dire need in the middle of a raging pandemic was instead diverted to pay for child support.

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And in a strange twist of misplaced action by officials, people who were married to someone who was paying child support also lost their stimulus check because overzealous debt collectors had garnished the full amount to pay for their spouse’s child debt.

First Stimulus Check Garnished To Pay For Child Support

Stories of such misplaced vigilantism are spread across California. That $1,200 stimulus check would have meant a world of difference for people at that stage.

Even unemployment checks were garnished as many saw a fourth of their money being garnished by debt collectors.

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Many low-income people in California are behind in their child support expenses. But the garnishments for child-support were stopped for the next two rounds of stimulus check.

Instead, the child support department of California lined up families by giving the first stimulus check to just custodial parents, parents who shared their home with the kid.

Typically a custodial parent indicates that a court of law has given primary physical or legal custody to one of the parents, or the parents have reached an agreement between themselves, or the child has only one parent.

But records show that the government continues to hold onto stimulus payment, effectively giving with one hand and taking away with another.

Records obtained by The Salinas Californian and CalMatters have revealed that California held back an astounding $430M just in 2020. That is a 16% jump over the previous year.

Parents lamented that they never received their stimulus check and also the unemployment check of $600, which was federally funded. And in many cases, even the child did not benefit from this state action.

California’s Long History Of Unjustified Collections

Stimulus Check
Stimulus Check

California’s administration has long held the feeling that people benefitting from state aid have a duty towards the government and should repay them at the earliest.

Parents who line up to claim government aid like CalWORKS are expected to repay their government. And the amount is not just confined to the amount. The parents are charged interest and have their driving license impounded.

California collects millions just in interests against past child support debts. Stuck in this vicious cycle, many people are unable to get a job, support their child and repay debts.

Profiting Out Of Child Support Services

California earns a hefty $2.5B from parents every year from the Dept. of Child Support Services. A large part of it goes to the custodial parent, though the state sets aside a part of it. It kept aside around $370 million in 2019 which were later plowed back into California’s general fund.

2020 proved to a bonanza for the California administration as the collection went through the roof thanks to the pandemic. And with Congress’s approval, California was able to snatch away money meant for people on the brink of starvation. The state earned $430 from the $2.8B that is collected. $207M went directly into the state coffers. That was a jump of 25% over what they had earned in 2019.

And the funds garnished from stimulus checks were more than the amount withheld from paychecks of non-custodial parents.

The stimulus amount intercepted fall under the classification of Federal Tax Refunds. And that amount tripled just in one year in 2020.

Benefiting From Unemployment Benefits

The money garnished went even higher as Congress approved the $600 through the CARES Act. The earnings from intercepts were just $33M in 2019. And that amount skyrocketed to $193M. Thus the child support system benefited primarily from the increased contribution of the unemployment checks and the child support remunerations.

Sending Money To The Parents At The Outset

Stimulus Check
Stimulus Check

The second and third stimulus checks are not allowed to be garnished by any state for parents. But the first stimulus check was used to even pay other debts payable to the government.

Normally tax refunds are intercepted for repaying federal funds. And it brings down the debt the parent owes to the agency.

Department of Child Support Services’ Kilgore said that the agency had taken the help of Gov. Newsom to direct the garnished stimulus amount first to a custodial parent and then to the government.

An executive order to that effect was passed by Governor Newsom in April last year. This order allowed the amount from federal stimulus payments to be directed to pay child support to custodial parents.

But if the family had no claim, the money was taken by the authorities to settle old debts.

Golden State Checks

But the proposed Golden State Stimulus Checks will not be garnished. But the money can be taken to pay delinquent support payments through bank levies. This was disclosed by the Franchise Tax Board.

The child support amount increased from $166M in 2019 to $207M in 2020.

Decision To Withhold Stimulus Check Causes Outrage

The decision to retain money meant for people severely affected by the pandemic drew derision from all quarters. Advocates expressed outrage at the decision and Mike Herald, Director of Policy Advocacy at the Western Law Center said that the unwarranted diversion meant no money or very little of it to pay for utilities, rent, or food.

He said that while millions lost their jobs due to the economic downturn, it was unfair to pay the stimulus check amount and the unemployment benefits for unpaid child support, and especially when a large share was being set aside by the government.

The letter that fathers received instead of the $1,200 was shared by thousands of fathers across California. The letter mentioned that the stimulus checks amounts went to the Dept. of Child Support Services. the pandemic proved to be a windfall for them.

Going back to the first stimulus check, if you had been denied your stimulus payment of $1,200 because the money was used to settle your spouse’s child support debts in the past, you can claim it, if the IRS hasn’t already sent it. You can claim the amount through a Recovery Rebate Credit.

The Rule For The Second And Third Stimulus Check

But your second and third stimulus check is impervious to any claims from state or Federal governments. But if you receive your first and second stimulus check as part of your 2020 tax refund (known as the Recovery Rebate Tax Credit), and not as a direct check, it may be reduced. For details you can refer to IRS FAQs Q E2 & Q E3).

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