Change to Garnishment Law, Effective April 2015

Clarification

**While this amendatory act takes immediate effect, it only applies to periodic writs of garnishment issued after September 30, 2015. The removal of the requirement to renew a periodic garnishment every 182 days is not immediately effective; any periodic garnishment issued before October 1, 2015 must still be renewed, and remains subject to the former garnishment rules and statutes.  If you have any questions about whether this amendatory act will affect your outstanding garnishments, or new garnishments, you should contact your attorney.**

On April 14, 2015, Governor Snyder signed into law House Bill 4119 P.A. 14 of 2015 (the "Bill"), which significantly reformed Michigan garnishment law.  The Bill amended MCL 600.4012, making the following modifications to periodic garnishments, effective immediately:

Periodic garnishments will now remain in effect until the balance of the judgment is satisfied, rather than having to renew the garnishment every 182 days under the previous provision. MCL 600.4012(1);
The garnishee fee has risen from $6.00 to $35.00. MCL 600.4012(12);
The periodic garnishment is not valid or enforceable unless it is served in accordance with the Michigan Court Rules. MCL 600.4012(4);
There are additional procedural obstacles before a default and default judgment can be entered against a garnishee. MCL 600.4012(6)-(8); and
There are additional protections for garnishees who have been defaulted.  MCL 600.4012(9)-(10).

Removal of 182-Day Expiration Period

This amendment streamlines the process to permit a single writ of garnishment to pursue collection of an entire judgment.  Now, the creditor may avoid additional costs of having to prepare and reissue supplemental writs of garnishment at the expiration of each 182-day period.

On the other hand, the removal of the 182-day expiration on garnishments has also eliminated a creative collection tactic aimed to move clients up the priority list by submitting a writ of garnishment a few days prior to the expiration of the writ that previously had priority.  By this method, the submitted garnishment would often obtain at least some funds during the year from that garnishee.  Unfortunately, the amendment to Michigan's statute will likely result in lower priority creditors having to wait longer periods before receiving any payment.  It is important to note, however, that creditors should still file the garnishment with the garnishee in order to establish priority, since the garnishee will be required to begin paying the next creditor in line once any prior garnishments have been paid in full or withdrawn. 

Increased Safeguards for Garnishees from Default Liability

The amendments include additional obstacles before a default and default judgment can be entered against a garnishee.  Under former garnishment provisions, if a garnishee failed to appropriately respond to a writ of garnishment, the creditor could pursue the garnishee directly for the full amount remaining due on the judgment set forth in the garnishment against the debtor.   Accordingly, the old statute provided quite an incentive for garnishees to comply with garnishment requests.  Although the new statute still allows default judgments against a garnishee who fails to fully comply with a periodic garnishment, the changes make it much more difficult to hold, for example, an employer-garnishee liable for failing to comply with a garnishment request related to its employee-debtors.  The Michigan Legislature added a number of notice provisions, allowing the employer 28 days to rectify a default, and additionally provided an extra 21 days to petition the Court to limit the total amount, even after default has been entered.

Conclusion

In conclusion, by removing the 182-day expiration period on garnishments, the statute makes it easier for first priority creditors to get paid.  The amendments also relax the risks to garnishees for less than timely responses.  In order to establish priority and ensure payment, creditors should contact their attorney for assistance with preparing and filing garnishments.