Michigan’s New Garnishment Law Will Cut Employers Some Slack

Michigan’s New Garnishm…

Writs (i.e., orders) of garnishment are a powerful legal weapon wielded by creditors in their efforts to collect on court judgments. At the same time, they present dangerous legal landmines for the unwary.

There are two categories of garnishment writs. A writ of non-periodic garnishment requires the non-party upon whom a garnishment is served (known as the “garnishee”) to withhold amounts that would otherwise belong to a judgment debtor. (Take, for instance, a bank which maintains a checking account for the judgment debtor.) On the other hand, a writ of periodic garnishment imposes a continuing obligation on a garnishee to make regular withholdings from the judgment defendant. (The classic example is the periodic garnishment served on an employer to capture a portion of the employee judgment debtor’s wages.)

Putting aside the headaches and expenses of processing garnishments, from a garnishee’s perspective, the gravest danger is being held liable for the entire amount of the judgment for failing to follow specific statutorily imposed rules, including submitting a completed garnishee disclosure within 14 days of receiving the writ. In fact, garnishees are often shocked to learn that a default judgment has been entered against them, often with little or no meaningful notice.

The Michigan legislature has addressed such fairness concerns by enacting Michigan Public Act No. 14, signed into law by Governor Snyder on April 14, 2015. The act amends MCL §600.4012 and the procedures for serving and responding to garnishments in Michigan. The amended law applies to writs of garnishment issued after September 30, 2015.

The new law will require a judgment creditor to follow additional steps before it can obtain a default judgment against a non-responsive or uncooperative garnishee. This means that employers and other potential garnishees will have greater opportunity to correct errors before being held liable for the entire debt.

The new law also provides that periodic garnishments will be valid until satisfied. (In the past, garnishments were good for only 182 days before requiring renewal.) In addition, judgment creditors will now be required to provide statements to the garnishee and the defendant every six months setting forth the balance owed on the judgment. This will help employers to ensure that they are not withholding too much or too little (another potential source of exposure). Within 21 days after the balance of the judgment has been paid in full (including interest and costs), the judgment creditor will now be required to provide to the garnishee and defendant a release of garnishment.

Finally, the amended act also increases the garnishment fee owed to garnishees from $6 to $35.

While the new statute will afford greater protection to garnishees, it is important that they remain mindful of their legal obligations to minimize potential legal exposure.

Please call Wright Beamer today if you need assistance in handling a collection matter.

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