We do not believe there are any provisions in the CARES Act or subsequent American Rescue Plan Act of 2021 that would prevent a creditor from garnishing PPP loan proceeds. Consequently, we believe it was appropriate to freeze your customer’s account on receiving a third-party citation to discover assets — provided you froze no more than twice the amount of the judgment.

We note that the CARES Act provides a list of specific allowable uses of PPP proceeds (such as employee salaries, rent, and utilities), and the list does not include the payment of judgments. As a result, your customer may argue that the CARES Act preempts state laws allowing PPP proceeds to be garnished. However, we believe it is for the court to decide whether a defense based on federal preemption is valid.

Additionally, we are not aware of limitations on garnishing PPP funds under state law. Although Illinois Executive Order 2020-25 (as amended by Executive Order 2020-55) suspends the provisions of the Illinois Code of Civil Procedure that permit the service of a citation to discover assets on a consumer debtor or garnishee, this protection does not extend to commercial debtors or garnishees who would be eligible to receive PPP funds. (Under Governor Pritzker’s most recent Executive Order, the suspension of garnishment and wage deductions for consumer debtors and garnishees is effective through May 29, 2021.)

For resources related to our guidance, please see:

• CARES Act, Section 1102, Paycheck Protection Program

• American Rescue Plan Act of 2021, Section 5001, Modifications to Paycheck Protection Program

• Illinois Code of Civil Procedure, 735 ILCS 5/2-1402(f)(1) (“The citation may prohibit the party to whom it is directed from making or allowing any transfer or other disposition of, or interfering with, any property not exempt from the enforcement of a judgment therefrom, a deduction order or garnishment, belonging to the judgment debtor or to which he or she may be entitled or which may thereafter be acquired by or become due to him or her, and from paying over or otherwise disposing of any moneys not so exempt which are due or to become due to the judgment debtor, until the further order of the court or the termination of the proceeding, whichever occurs first. The third party may not be obliged to withhold the payment of any moneys beyond double the amount of the balance due sought to be enforced by the judgment creditor. The court may punish any party who violates the restraining provision of a citation as and for a contempt, or if the party is a third party may enter judgment against him or her in the amount of the unpaid portion of the judgment and costs allowable under this Section, or in the amount of the value of the property transferred, whichever is lesser.”)

• CARES Act, Section 1102(a)(2)(F), Paycheck Protection Program (“ALLOWABLE USES OF COVERED LOANS. (i) IN GENERAL. During the covered period, an eligible recipient may, in addition to the allowable uses of a loan made under this subsection, use the proceeds of the covered loan for

(I) payroll costs;

(II) costs related to the continuation of group health care benefits during periods of paid sick, medical, or family leave, and insurance premiums;

(III) employee salaries, commissions, or similar compensations;

(IV) payments of interest on any mortgage obligation (which shall not include any prepayment of or payment of principal on a mortgage obligation);

(V) rent (including rent under a lease agreement);

(VI) utilities; and

(VII) interest on any other debt obligations that were incurred before the covered period.”)

• Illinois Executive Order 2020-25 (April 14, 2020) (“During the duration of the Gubernatorial Disaster Proclamations, Sections 5/12-705, 5/12-805, and 5/2-1402 of the Illinois Code of Civil Procedure, 735 ILCS 5/12-705, 735 ILCS 5/12-805, and 735 ILCS 5/2-1402, that permit the service of a garnishment summons, wage deduction summons, or a citation to discover assets on a consumer debtor or consumer garnishee, are suspended.”)

• Illinois Executive Order 2020-55 (September 18, 2020) (“Notwithstanding the foregoing, nothing in this Executive Order shall be construed to apply to domestic support obligations, including child support and spousal maintenance obligations, or to any proceeding pursuant to the Illinois Wage Payment and Collection Act, 820 ILCS 115, Minimum Wage Law, 820 ILCS 105, or the Prevailing Wage Act, 820 ILCS 130.”)

• Illinois Executive Order 2021-09 (April 30, 2021) (“Executive Order 2020-25, as amended by Executive Order 2020-55, is re-issued in its entirety and extended through May 29, 2021.”)