Foster Swift Finance, Real Estate and Bankruptcy News
June 18, 2015
Amended rules governing the issuance, service, and enforcement of periodic garnishments will go into effect on Oct. 1, 2015. The amendments will, among other changes, provide much needed protection to garnishees from the imposition of a default or default judgment resulting from administrative or ministerial errors and will also streamline the periodic garnishment process.
The amendments protect garnishees against entry of a default or default judgment because of administrative or ministerial errors, which often result from improperly served garnishments. Currently, a garnishor may request a default and default judgment in the full amount of the garnishment against the garnishee if the garnishee does not file its Garnishee Disclosure within 14 days after service of the garnishment—whether or not the garnishee is indebted to the judgment-debtor—and without providing any further notice to the garnishee. Garnishees face an uphill battle to have a default or default judgment set aside and are oftentimes forced to “buy” their way out of the default or default judgment, even if it owes nothing to the judgment-debtor.
Under the amended law, before requesting entry of a default, the garnishor must first serve the garnishee with a Notice of Failure to File Garnishee Disclosure and allow the garnishee 28 days thereafter to file the Garnishee Disclosure. If the garnishee does not file the Garnishee Disclosure, the garnishor may seek a default, but must attach a copy of the proof of service for the Notice of Failure, and serve the request for default on the garnishee or its registered agent.
Even after entry of a default judgment, the garnishee may, within 21 days after entry of the default judgment, request that the court set aside or modify the default. However, the garnishee must first certify via affidavit that its failure to respond to the garnishment was inadvertent or caused by administrative error, mistake, or other oversight, and that it will begin withholding funds immediately (if there are any owing).
The court may also set aside the default judgment if the garnishee was not liable to the judgment-debtor or if the garnishment, Notice of Failure, request for default, or request for default judgment were not properly served, or if the Notice of Failure was inaccurate or incomplete.
Unfortunately, the amendments do not address similar issues garnishees face with default judgments resulting from non-periodic garnishments.
The amendments also:
- Provide that periodic garnishments will remain in effect until the underlying judgment is paid in full, rather than having to be renewed every 182 days. Thus, garnishors need only issue a single periodic garnishment to collect on their judgment, and garnishees need only prepare and file a single Garnishee Disclosure.
- Increase the fee a garnishor must pay the garnishee to respond to and process the garnishment from $6 to $35.
- Require the garnishor to provide the garnishee with a statement at least once every six months of the outstanding balance on the judgment, including interest and costs.
- Require the garnishor to file a Release of Garnishment within 21 days after the judgment is satisfied in full.
The amendments are codified at MCL § 600.4012. Amendments to the Michigan Rules of Court will also be forthcoming to incorporate the new procedures. And the State Court Administrative Office will also be updating the official forms related to periodic garnishments. Garnishors and garnishees should be on the lookout for the new forms in early September 2015, since it is likely courts will no longer accept the current forms after Sept. 30, 2015.
In This Issue
- Michigan Joins Eight Other States in Signing Agreement to Facilitate Ability of Credit Unions to Operate Across State Lines
- Supreme Court Decides Bullard V. Blue Hills Bank and Rules that an Order Denying a Chapter 13 Plan Is Not Appealable
- Upcoming Webinar Series: Collect Your Money in Bankruptcy
- Whose Money Is It? Supreme Court Rules for Debtor in Dispute over Postpetition Wages
- Michigan Landlord/Tenant Law Amended to Allow for Electronic Service of Eviction Notices
- Credit Reporting Agencies Unite to Transform Reporting and Resolution Practices