Stop the Bill: Creditors to take Tax Refund

Following the Story from RTV Channel 6 INDIANAPOLIS - While many Hoosiers are already planning how to spend their tax return money, one bill moving through the Indiana Legislature could give creditors first dibs on that money.

Under certain circumstances, creditors can already garnish a debt via bank accounts or wages. If House Bill 1358 passes, state tax returns will be added to that list.

"Another tool in the toolbox in order to help the judgment creditor collect money that they are legally entitled to," the bill’s author Rep. Casey Cox, R-Fort Wayne, explained.

The bill essentially puts state tax returns up for grabs for anyone whose debt has been taken to court. In that case, a creditor can pay an $8 processing fee to ask a judge to seize that money.

"Just like garnishing wages, just like being able to put a lien on property," Cox said.

Compared to a similar law in Michigan, Cox estimates the $8 fee will add up to millions of dollars in annual state revenue.

"Based on our population figures and based on what Michigan does, we think we're looking at a net positive to the state of about $2 million, conservatively," Cox said.

There are certain groups of people whose tax returns would not be on the chopping block -- including those who make less than $41,000 a year.

The bill would not have any effect on a federal tax return.