Mishandling Wage Garnishments is Risky and Costly

March 4, 2015

Federal and state laws provide protection to creditors and employees, but impose significant expense and risk upon employers even for minor or unintentional errors. Don’t assume most garnishments are small and present little risk; some garnishments can be remarkably large.

In the past few years, I have seen default judgments starting at $500 against Michigan employers for mishandling a garnishment – one was for $596,000! These judgments resulted from simple oversight – failing to file and serve the completed garnishee disclosure form within 14 days.

Garnishments are judicially-enforced attempts by creditors to collect on a judgment by attaching the debtor’s property, money or income held by a third party. To obtain a wage garnishment, a creditor must first obtain a judgment against a debtor. After the debt is reduced to a judgment, the creditor may have a garnishment issued to collect the judgment. Once a writ for garnishment is served on the employer, the judgment creditor has a legal right to the judgment debtor’s future earnings; subject to state and federal limitations.

Garnishments may appear informal because lawyers are not always involved and the proceedings are mostly administered with pre-printed forms. However, garnishment is actually a formal legal proceeding involving a complaint, answer, discovery, motions and trial.

It is essential to realize that while most creditors simply want to collect from the debtor, a few creditors, realizing they may never collect from the delinquent debtor, will pounce on any employer error because current Michigan law allows creditors to force an employer who makes even the slightest mistake, to pay the full judgment debt.

Contributed by Martin C. Brook, Shareholder, Ogletree Deakins

View the on-demand webinar “Wage Garnishments: Legal Risks and Compliance” with Martin Brook.