Understanding Garnishment Notices in Michigan: What Business Owners Need to Know
As a business owner, the more your business grows it is likely you will encounter some form of garnishment notice. Whether it is garnishing an employee's paycheck or surrendering property held for a third party, receiving a Writ of Garnishment is a serious matter that requires immediate attention and compliance. In today's post, the business attorneys at Thompson Legal will discuss the different types of garnishments notices Michigan businesses may receive and the obligations they entail.
Please note that this post is not exhaustive, and every situation is unique. In the event that you have questions about your business, it’s advisable to speak with a licensed attorney. Contact Thompson Legal to schedule a discovery call with a Michigan business attorney.
What is a Garnishment?
Garnishment is a legal procedure where a creditor seeks to collect a debt by obtaining a court order to seize a debtor's money or property held by a third party, known as the garnishee. Commonly, creditors garnish wages, bank accounts, and accounts payable. Essentially, when a creditor obtains a legal judgment against a defendant who can't immediately pay, they can apply for garnishment, requiring third parties like employers to remit a portion of the defendant's paycheck.
Types of Garnishments
There are two main types of garnishments in Michigan: Non-Periodic and Periodic. Non-Periodic garnishments involve one-time payments, while Periodic garnishments involve recurring payments like wages. Periodic garnishments are applicable to earnings such as wages, bonuses, rental income, and possibly a retirement plan.
Garnishment Duration
Writs for periodic garnishments do not expire. They are effective until the balance of the judgment, interest, and costs are paid. Non-periodic garnishments by definition are one-time payments. However, should the initial garnishment not pay off the Judgment, the creditor is free to seek another garnishment.
Garnishment Compliance
Upon receiving a Writ of Garnishment approved by the court clerk, your business must promptly send a copy to the defendant within 7 days. Within 14 days, you must file a verified disclosure indicating any owed amounts to the defendant and send copies to both the creditor and defendant listed on the Writ of Garnishment. Business owners should note that it is illegal to fire an employee for a garnishment.
An employer must start deducting from your paycheck for the first full pay period after receiving the notice. Every payment withheld must be documented and reported to the creditor and defendant, including the case number, date, amount withheld, and remaining balance on the Writ of Garnishment. After 28 days, withheld funds must be transmitted to the creditor unless objections to the garnishment are pending.
Consequences of Non-Compliance
Failure to respond to a Writ of Garnishment can lead to dire consequences. The creditor may obtain a default judgment against you, making your business liable for the entire debt owed by the defendant, regardless of prior involvement with the creditor. Default judgments can be challenging and expensive to overturn, therefore it is recommended your business develop thorough garnishment procedures to ensure you stay in compliance.
Ensuring Compliance is Vital
Full compliance with garnishment notices is imperative to avoid severe penalties. Failure to comply with garnishment requirements could result in your business becoming liable for the defendant's debt. While complex, ensuring adherence to legal requirements is essential to protect your business's interests. If your business has questions or concerns about a garnishment notice you have received, contact Thompson Legal for guidance and support.
This blog is for informational purposes only. It is not intended as legal advice. In the event you would like to speak with a business attorney about your case Contact Us at (734) 743-1646 to schedule a consultation.
