The federal stimulus package, which is also called the CARES Act, directs the IRS to send you a stimulus check.
Under the CARES Act, your stimulus check is specifically exempt from being counted as income in your Bankruptcy case.
However, once you file a Bankruptcy case, the expectation of your stimulus check and the actual deposit of your stimulus check into your checking account may be considered an “asset” of your Bankruptcy case.
Many states have a “wild card exemption” which means that you are allowed to have up to
$12,500 in assets, per spouse, that is exempt in your Bankruptcy case. However, this wild card exemption may only count if you are not claiming a home as an exemption.
In Chapter 13 cases, the stimulus check as an asset of your Bankruptcy case will not be a concern.
However in Chapter 7 cases, if your assets exceed the allowed amount, then you are typically required to turn over excess assets to the Trustee to be distributed to your creditors.
The good news is that the U.S. Trustee’s Office has issued a notice to all Chapter 7 and Chapter 13 Trustees that it does not expect the Trustees to be taking federal stimulus funds from Bankruptcy filers. It is also directing the Trustees to notify the U.S. Trustee’s Office before taking any stimulus checks.
The best advice for clients who have not yet filed a Bankruptcy case is to take the federal stimulus check and spend it down before you file your Bankruptcy case. This is what the stimulus check is meant to be used for. Spend the funds on your daily living expenses such as rent, food and utilities.