Indiana Emergency Order Protects Stimulus Funds From Garnishment

In response to a petition for emergency rulemaking brought by Indiana Legal Services and other Indiana advocacy groups, the Indiana Supreme Court ordered today that stimulus funds paid out under the CARES Act cannot be garnished by private creditors.

The CARES Act, passed by Congress on March 27, 2020, protects the stimulus checks being paid out to Americans for relief from economic downturn caused by COVID-19 from being garnished for public debts such as taxes or student loans. However, the new law did not protect the garnishment of such funds by private creditors.

In its order of April 20, 2020, the Indiana Supreme Court invoked its original jurisdiction and emergency rulemaking authority under the Indiana Constitution and Indiana Trial Rule 80(D) to order that no new holds, attachments, or garnishments may be made on account funds in a depositary institution, so long as those funds are attributable to stimulus payments. The rule will stay in place until the expiration of the COVID-19 public health emergency as declared by Governor Eric Holcomb or an earlier order by the Court. For debtors who are subject to child support payments, the order does not protect stimulus funds from being garnished for that purpose.

Debtors subject to a previous garnishment, hold or attachment order on funds in the debtor’s deposit account may request the issuing court for a hearing to determine which funds are attributable to the stimulus and may assert an exemption under the new Indiana Supreme Court order in addition to any current state and federal exemptions. The Indiana Supreme Court has deemed these hearings to be “essential” and “urgent,” and the issuing court must conduct the hearing with two business days of its receipt of the debtor’s request.