Garnishment is one of the most powerful weapons that a judgment creditor can wield. It can take many forms – wage garnishment, bank account garnishment, tax refund garnishment. Any or all of these may be utilized in order to collect on a judgment.
In the state of Michigan, a judgment creditor can seize up to 25% of your wages via a wage garnishment – this may continue until the debt is satisfied. If you thought you were having a difficult time paying your bills before – imagine how hard it would be with only 75% of your paycheck!
A bank account garnishment can seize any and all funds you may have in the bank to go towards satisfying a judgment. Yeah that's right, there is no limit on how much can be seized. From time to time, during a consultation, a perspective client will exclaim something to this effect: 'they took my whole bank account and didn't even warn me'. The only warning you'll get is the entry of the judgment itself. Think about it – if the judgment creditor was required to warn you about an impending bank account garnishment, what would be the first thing you'd do?
Judgment creditors can also garnish tax refunds. Creditors whose judgments are in District or Circuit Courts are limited to attempting to garnish state tax refunds (i.e. not federal tax refunds).
Filing a Chapter 7 or Chapter 13 bankruptcy generally stops a garnishment. Once a bankruptcy petition is filed, the Debtor is protected by the ' automatic stay' of proceedings. This is the 'shield' that protects against further collection efforts. Upon being notified of a bankruptcy filing, a judgment creditor is required to file a 'Release' of a garnishment. In certain instances, the judgment creditor may even have to return what was garnished! Timing is crucial here and is another example of why you should seek the assistance of an experienced Michigan bankruptcy attorney.
If you're dealing with a garnishment of any type, give me a call or shoot me an email. I have offices in Madison Heights and Brighton and I offer a free initial consultation.