MAY 11, 2020 UPDATE: You will not lose it. The Chapter 7 Trustees in Utah have been quietly ignoring it. Three of them have actually been stating on the record that they will not take it from you.
Plan on losing it, but nothing is guaranteed right now.
April 1, 2020 update: In Utah (and most states), the Chapter 13 Trustees have stated that they will not be taking the stimulus money. (See email at bottom of blog entry) At least one Chapter 7 Trustee has already stated that she will definitely take the stimulus checks.
In 2001, President Bush sent out economic stimulus checks of about $300 a person to try to jump start the economy after the .com bubble burst.
In 2008, President Bush sent out economic stimulus checks of about $600 a person to try to help the economy with the sub-prime lending/housing crash.
Today in 2020, there is very strong talk of a stimulus check of at least $1,000 to each adult to help stimulate the economy after the recession effects of the NOVID-19/coronavirus hit.
Throwing bankruptcy into the mix complicates matters. On the day you file bankruptcy, your bankruptcy estate is created. This estate includes all of your personal and real property and your tax refunds. Normally, we can exempt (protect) most of it from the bk trustee. Unfortunately, here in Utah, your tax refund is not safe from a bk trustee, so you need to receive and spend the refund before you go bankrupt, or the trustee can take it and use it to pay your creditors. That stimulus check may (or may not) be part of your bankruptcy estate.
All I know for certain is that if you receive and spend the stimulus before you file bankruptcy, it is gone, and it is not part of your bankruptcy estate.
If you file bankruptcy first, there is a good chance that you will lose the stimulus money to your trustee. It comes down to when your receive the right to receive the stimulus and what the stimulus is tied to. That being said, the only Utah case I found was actually positive for the debtors. In that case, Debtors filed bankruptcy in 2007. The Economic Stimulus Act passed in 2008, and their chapter 7 trustee tried to take that stimulus money when the checks came in. One of our current judges, Judge William T. Thurman, found in favor of the debtors (letting them keep the money). He found that since their right to receive the stimulus money didn’t arise until after their bk was filed, it was not part of the bankruptcy estate. See In Re Andrews, 386. B.R. 871 (Bankr. D. Utah 2008).
This sounds great, because it sounds like the court is saying: if the stimulus package isn’t passed until after you file bk, then you get to keep the money.
However, we have another case out of Kansas (which is admittedly NOT Utah), which forced debtors who had filed bankruptcy in March of 2008 to turn over their stimulus payment from the May 2008 Economic Stimulus Act because the triggering act to receive that stimulus was the filing of their 2007 tax returns. They lost the stimulus because the stimulus money was tied to their 2007 taxes (which occurred before the bk). See In Re Schwinn, 08-10528 (Bankr. D. Kansas 2008).
This doesn’t sound great, because the bk trustee took the money after arguing that it was tied to their taxes from the previous year.
I don’t know how the 2020 stimulus will be worded, but I fear that bk trustees will be salivating and sharpening their knives when those checks go out. Plan on losing it for now, and it you end up getting to keep the check, it’ll seem all the sweeter.
April 2, 2020 update: Here is the email from the Chapter 13 Trustee for Utah:
A number of you have inquired whether the Chapter 13 office will be requiring turnover of stimulus checks received by debtors. For your reference, attached is a copy of the new law as it relates to the Bankruptcy Code amendments. In short, the stimulus payments to debtors are excluded from Current Monthly Income in the same manner as social security payments under the amendments to section 101(10A)(B)(ii). In addition, the stimulus payments are excluded from disposable income under the amendments to section 1325(b)(2). We will not be requiring turnover of stimulus payments received by debtors. Thank you.