When a Judgment Debtor Says, “Come and Get It,” Garnishments Provide a Michigan Creditor With a Powerful and Effective Reply

By David M. Eisenberg

If you are a Michigan creditor, obtaining a money judgment against a debtor is a significant step towards obtaining the sums you or your company is owed. But a judgment is simply a piece of paper; you can’t deposit it into your company’s bank account or mark the debt as paid on your ledger. While some judgment debtors may pony up with little resistance in the face of a judgment, others are quite content to sit back and smugly tell their creditor to “come and get it.”

In that latter circumstance, one of the most effective ways for a judgment creditor to “come and get it” is through garnishment. This powerful collection tool allows a judgment creditor to collect funds directly from the debtor’s wages, bank accounts, or other sources. As effective as they are, garnishments do not give a creditor carte blanche to go after a debtor’s assets or income. Michigan law provides a structured process for obtaining garnishments and places limits on their use in an attempt to balance the creditor’s right to collect on their debt while also protecting debtors from excessive financial hardship.

If you have obtained or are seeking a money judgment against a debtor, here are the basics about Michigan garnishments.

Types of Garnishments in Michigan

Michigan law recognizes three primary types of garnishments available for judgment creditors, tailored to the kind of asset targeted for collection. The process of obtaining and enforcing a garnishment differs for each and must be strictly followed. Failure to comply with the statutorily mandated requirements can negate the validity of the garnishment and can expose the creditor to potential liability.

The three types of Michigan garnishments are:

• Periodic (Wage) Garnishments – This garnishment is typically used to obtain a portion of the debtor’s wages or salary from each paycheck. 
• Non-Periodic Garnishments – These apply to bank accounts or other non-wage sources of funds. This is usually a one-time seizure of available funds.
• Tax Refund Garnishments – Creditors may also garnish state tax refunds owed to the debtor.

The Garnishment Process

There are multiple steps along the garnishment journey from judgment to collection:

• Request for Garnishment. With a money judgment in hand, the creditor’s first step is to file a “Request and Writ for Garnishment” (Form MC 12) with the court that entered the judgment. The creditor cannot file the request until 21 days after the entry of the judgment. There are different forms depending on the type of garnishment requested—periodic, non-periodic, or tax refund garnishment.
• Serving the Garnishee. Once the creditor obtains a writ of garnishment, it must be served according to Michigan court rules on the party responsible for holding the debtor’s funds, known as the “garnishee.” For wage garnishments, this is the debtor’s employer; for bank garnishments, it is their financial institution.
• Garnishee’s Response. Once served, the garnishee has seven days to respond to the writ by filing a Garnishee Disclosure in which it tells the creditor, the court, and the debtor if it owes the debtor money or holds the debtor’s money and, if so, how much is available for garnishment. The garnishee must then hold the funds for 28 days from the date the writ was served on the garnishee. If the debtor has not filed an objection after 28 days, the garnishee must deliver the money to the judgment creditor.
• Funds Withholding and Payment. If the garnishee confirms the availability of funds, they must begin withholding the appropriate amount and sending payments to the creditor. The payments continue until the judgment is satisfied, the garnishment expires, or the court orders otherwise.

How Wage Garnishments Work

Michigan follows federal and state laws regarding wage garnishment limits. Under the Consumer Credit Protection Act (CCPA), the maximum amount that a creditor can garnish from a debtor’s wages is the lesser of:

• 25% of disposable earnings (earnings after legally required deductions).
• The amount by which disposable earnings exceed 30 times the federal minimum wage.

Certain types of income, such as Social Security benefits and workers’ compensation, are exempt from garnishment.

Employers must comply with wage garnishment orders by withholding the required amount from the employee’s paycheck. They must also provide a copy of the garnishment order to the employee. Failure to comply with garnishment orders can result in penalties against the employer.

How Bank Account Garnishments Work

Non-periodic garnishments are most commonly used to seize funds from a debtor’s bank account. Once served, the bank must freeze the account and respond with a disclosure form indicating the available balance. If funds are available, the bank then transfers them to the creditor after accounting for any applicable exemptions, which include the following types of funds protected from garnishment:

• Social Security benefits
• Veterans’ benefits
• Unemployment benefits
• Public assistance funds
• Pension payments

How Tax Refund Garnishments Work

To garnish a debtor’s Michigan state tax refund, the creditor must file a garnishment request with the Michigan Department of Treasury. Federal tax refunds, however, are not subject to garnishment by private creditors unless the debt is for child support, student loans, or certain federal obligations.

What if the Debtor Files for Bankruptcy?

If a debtor files for bankruptcy, the automatic stay that goes into effect upon filing puts a halt on any garnishments and any other collection efforts until the bankruptcy case is resolved. A creditor who proceeds with their collection efforts while aware of the automatic stay does so at significant peril. Michigan garnishments are powerful collection weapons, but they can backfire on a creditor if handled incorrectly. Additionally, there is a bill pending in the Michigan Legislature that would modify the types and value of wages, money, and property exempt from garnishment and execution if it became law (we will, of course, provide an update if does) Accordingly, knowing how to wield a garnishment effectively and ensuring that collection efforts comply with current law  is the key to getting the money you’re owed.

If you have questions or would like assistance with obtaining and enforcing a garnishment or any other collection efforts, please contact David Eisenberg at Maddin Hauser.