Protecting the 2020 CARES Act Stimulus Payment in Bankruptcy

The 2020 Coronavirus Aid, Relief, and Economic Security (CARES) Act has provided a much-needed economic stimulus to those most affected by the pandemic. For many individuals and families, this stimulus money could be the difference between financial stability and bankruptcy. With that said, it is important to understand how these funds may be protected in the event of a bankruptcy filing.

The CARES Act stipulates that any stimulus payments received are exempt from creditors in both Chapter 7 and Chapter 13 bankruptcies. This means that creditors cannot take any of your stimulus money as payment for debts you owe them. This protection applies both to the initial payment received as well as any interest earned on it. However, if you use some or all of the stimulus payment for non-essential purchases or gambling, then those funds may be subject to seizure by creditors.

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