Child Tax Credit Payments

Child tax credits and Bankruptcy

Child tax credit payments increased yesterday, July 15, 2021, and this is a good thing for the many families who can benefit from it.  The IRS is sending, for families who are eligible, up to $300 a month in child tax credits for each child under 6 years of age, and up to $250 per month in child tax credit payments for each child under 18.

But it’s more than just monthly payments. These families will also get an additional child tax credit up to $1,800 each year for kids under age 6, and a child tax credit of $1,500 for each child under 18 on their 2021 tax returns.

Are Child Tax Credits Safe from my Creditors and Collections?

Can creditors take Child Tax Credits from my bank account? There is no specific federal protection for these child tax credit payments that are in your bank account. However, there may be some state protection which can keep your child tax credits from being frozen on seized. Each state’s protections (or exemptions) are different. In California, this amount is $1,788, using CCP 704.220. There may be other ways to protect it.

Do the Child Tax Credit Payments Count in Bankruptcy?

There’s a different question: what about in bankruptcy? Do the child tax credits count in bankruptcy? During the COVID-19 pandemic, many of the benefits were excluded from bankruptcy, due to temporary changes in 11 USC 541. However, it appears that this benefit was provided in an appropriations bill in March 2021 that did not reference pandemic relief, and as such, it may have to be counted in a bankruptcy a current monthly income.

Meet with a Los Angeles bankruptcy lawyer for more information to find out if your child tax credit payments are safe and excluded.

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