Wage garnishment is a remedy available to creditors who have not been paid on valid, legally enforceable debts, such as those resulting from court judgments or from not paying taxes. Garnishment generally is a mechanism under which a court makes a third party (the “garnishee”) surrender some of the debtor’s money which is in its possession or which it owes to the debtor; the money is instead sent to the creditor for the judgment. Wage garnishment specifically is when the garnishee is the debtor’s employer and the money is debtor’s salary or wages. However, while wage garnishment is a common and high-profile kind of garnishment, remember that garnishment can apply to any income or money belonging to or owed to the debtor, which is in the control of a third party.
Also remember that garnishment is available for any debt—the only requirement is usually that the creditor has obtained a monetary (or money) judgment, which is a court determination that the debtor owes money to the creditor.
Michigan Garnishment Exemptions and Non-Exemptions
Not all income is subject to garnishment: many non-wage, non-salary source of income, including many government benefits, some pensions and retirement benefits, and some insurance proceeds, are typically protected from garnishment.
Federal law, for example, makes Social Security subject to garnishment only for federal taxes (and a few other federal debts), child support, and alimony.
Michigan law adds the following additional types of exemptions:
- Pensions and retirement benefits: Michigan is more protective of retirees than most states. Not only are state employee, public school employee, and police and firefighter pensions protected from garnishment, but retirement benefits generally, including IRAs, enjoy broad exemptions from garnishment.
- Most kinds of public benefits or assistance are protected, such as: workers’ compensation; unemployment benefits; aid to families with dependent children; crime victim’s compensation; welfare benefits; benefits to war veterans.
- Insurance and annuities: fraternal society benefits; life insurance or annuity proceeds, if the policy states that they cannot be used to pay creditors; disability and health insurance benefits.
However, not all the exemptions or protections referred to above are absolute. Several of them provide protections from most creditors and most debts, but not from garnishment for child support.
Michigan Maximum Threshold
Not only are some categories of income entirely exempt, but there is a limit to how much non-exempt income can be garnished, too. The idea, of course, is to allow debtors something to live on.
Michigan, like most other states, follows federal law in determining how much non-exempt income could be garnished. Under federal law, the lesser of the following may be garnished:
- A total of 25% of disposable income
- The amount by which a debtor’s weekly income exceeds 30 times the minimum wage
“Disposable income,” as used in a garnishment context, does not mean what it means in everyday usage. The vast majority of necessary expenses, including housing, food, transportation, 401(k) contributions, health plan premiums, etc. are ignored. The only amounts taken out in determining garnishment disposable income are legally required payroll deductions, of which FICA is usually the most significant. As a result, 90% or more or a person’s income is typically considered “disposable.”
In addition, under federal law, there are some debts for more than 25% of the debtor’s income may be garnished: taxes and child support.
Michigan Statute of Limitations
If the creditor already has a judgment in favor, Michigan gives the creditor has at least another 10 years (possibly more; renewing or extending the time period is possible) to enforce the judgment, such as by garnishment. A consequence of this is that the creditor can wait until a down-on-his-or-her-luck debtor starts earning more money before initiating wage garnishment.
If the creditor does not yet have a judgment in hand, it needs to bring a legal action, or sue, in order to obtain one. That means it needs to bring the action within the statute of limitations, or time to sue, for that type of debt or cause of action. For some of the most common consumer debts, the limitation periods in Michigan are the same:
- Open accounts (credit cards), oral (or verbal) contracts: 6 years
- Written contracts: 6 years
Writ of Garnishment in Michigan
In brief, the process of getting an order (often called a writ) of garnishment in Michigan is:
1) Get a judgment ordering the debtor to pay a certain amount
2) Apply to the court in writing for garnishment in order to satisfy the judgment
3) As part of the application, identify a garnishee (such as the debtor’s employer) which is believed to have money belonging or owed to the debtor, which can be used for satisfying the judgment
4) The garnishee is served and required to confirm or correct that it has money owing or belonging to the debtor
5) If the garnishee does have funds of debtor’s that can be garnished for the creditor’s benefit, it will be ordered to garnish them. More on Stopping Wage Garnishment in Michigan
Getting Legal Help
It may seem like challenging garnishment is a waste of time and money—after all, the creditor is simply looking to enforce a debt which has already been litigated and found to be valid. However, notwithstanding that, an attorney can help a debtor fight a garnishment which is in error or too old, which is based on a judgment which was granted improperly (such as if the debtor never received proper notice he or she was being sued), or where an attempt is being made to garnish protected income.